As filed with the Securities and Exchange Commission on April 26, 2000
1933 Act Registration No. 333-35587
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 5
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
UNITED OF OMAHA SEPARATE ACCOUNT B
(Exact Name of Trust)
UNITED OF OMAHA LIFE INSURANCE COMPANY
(Name of Depositor)
Mutual of Omaha Plaza, Omaha, Nebraska 68175
(Address of Depositor's Principal Executive Offices)
Name and Address of
Agent for Service:
Michael E. Huss, Esquire
Mutual of Omaha Companies
Mutual of Omaha Plaza, 3-Law
Omaha, Nebraska 68175-1008
Internet: [email protected]
Flexible Premium Variable Life Insurance Policy
(Title of securities being registered)
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b).
|X| On May 1, 2000 pursuant to paragraph (b).
[ ] 60 days after filing pursuant to paragraph (a)(1).
[ ] On [date] pursuant to paragraph (a)(i) of Rule 485.
If appropriate, check the following box:
|X| This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
[ ] Check box if it is proposed that this filing will become effective
on (date) at (time) pursuant to Rule 487.
------
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
Registration Statement on Form S-6
Cross-Reference Sheet
Form N-8B-2
Item No. Caption in Prospectus
1 Cover Page
2 Cover Page
3 Inapplicable
4 Policy Distributions
5 About Us
6 Variable Investment Options
9 Inapplicable
10(a) Policy Application and Issuance
10(b) Policy Distributions
10(c), (d), (e) Policy Distributions; Lapse and Grace Period; Reinstatement
10(f), (g), (h) Voting Rights; Tax Matters
10(i) Important Policy Provisions
11 Variable Investment Options
12 Variable Investment Options; Policy Distributions
13 Expenses; Tax Matters; Policy Distributions; Appendix A
14 Policy Application and Issuance
15 Policy Application and Issuance
16 Variable Investment Options
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 Variable Investment Options
19 Reports to You; Voting Rights; Policy Distributions
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Inapplicable
23 Policy Distributions
24 Important Policy Provisions
25 About Us
26 Policy Distributions
27 About Us
28 Our Management
29 About Us
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Inapplicable
35 About Us
36 Inapplicable
37 Inapplicable
38 Policy Distributions
39 Policy Distributions
40 Inapplicable
41(a) Policy Distributions
42 Inapplicable
43 Inapplicable
44(a) Variable Investment Options; Policy Application and Issuance
44(b) Expenses; Policy Distributions
44(c) Expenses
45 Inapplicable
46 Variable Investment Options; Captions referenced under Items
10(c), (d), and (e) above
47 Inapplicable
48 About Us
49 Inapplicable
50 Variable Investment Options
51 Cover Page, Introduction and Summary, Important Policy
Provisions, Tax Matters, Policy Distributions
52 Tax Matters
53 Tax Matters
54 Inapplicable
55 Inapplicable
59 Financial Statements
<PAGE>
UNITED OF OMAHA
A MUTUAL OF OMAHA COMPANY LOGO PROSPECTUS: May 1, 2000
ULTRA VARIABLE LIFE
Individual Flexible Premium
Variable Universal Life Insurance
This Prospectus describes ULTRA VARIABLE LIFE, a variable universal life
insurance policy offered by UNITED OF OMAHA LIFE INSURANCE COMPANY. The minimum
specified amount of insurance coverage is $100,000.
<TABLE>
<CAPTION>
<S> <C>
The Policy includes 30 variable options (where you
The investment portfolios offered have the investment risk) with investment portfolios
through the Policy may have names that from:
are nearly the same or similar to the
names of retail mutual funds. However, THE ALGER AMERICAN FUND
these investment portfolios are not the DEUTSCHE ASSET MANAGEMENT VIT FUNDS
same as those retail mutual funds, even FEDERATED'S INSURANCE SERIES
though they have similar names and may FIDELITY'S VARIABLE INSURANCE PRODUCTS FUNDS
have similar characteristics and the AND VARIABLE INSURANCE PRODUCTS FUND II
same managers. The investment MFS VARIABLE INSURANCE TRUST
performance of these investment MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS
portfolios is not necessarily related to PIONEER VARIABLE CONTRACTS TRUST
the performance of the retail mutual SCUDDER VARIABLE LIFE INVESTMENT FUND
funds. The investment portfolios are T. ROWE PRICE EQUITY SERIES, FIXED INCOME
described in separate prospectuses that SERIES AND INTERNATIONAL SERIES
accompany this Prospectus.
and two fixed rate options (where we have the
investment risk).
</TABLE>
The variable options are not direct investments in mutual fund shares, but
are offered through Subaccounts of United of Omaha Separate Account B. THE VALUE
OF YOUR POLICY WILL GO UP OR DOWN BASED ON THE INVESTMENT PERFORMANCE OF THE
VARIABLE OPTIONS THAT YOU CHOOSE. THERE IS NO MINIMUM GUARANTEED CASH SURRENDER
VALUE FOR ANY AMOUNTS YOU ALLOCATE TO THE VARIABLE OPTIONS. THE AMOUNT OF THE
DEATH BENEFIT CAN ALSO VARY AS A RESULT OF INVESTMENT PERFORMANCE.
Please Read This Prospectus Carefully. It
provides information you should consider
before investing in a Policy. Keep this
Prospectus and the prospectuses for the
investment portfolios for future
reference.
The Securities and Exchange Commission
("SEC") maintains an internet web site
(HTTP://WWW.SEC.GOV) that contains more
information about us and the Policy. You may
also review and copy our SEC registration of the
Policy at the SEC's Public Reference Room in
Washington, D.C. (call the SEC at 1-800-SEC-0330
for details and public hours).
THE SEC DOES NOT PASS UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS, AND HAS NOT APPROVED OR DISAPPROVED THE POLICY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
REMEMBER THAT THE POLICY AND THE INVESTMENT PORTFOLIOS:
o ARE SUBJECT TO RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL
o ARE NOT BANK DEPOSITS
o ARE NOT GOVERNMENT INSURED
o ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY
o MAY NOT ACHIEVE THEIR GOALS
UNITED OF OMAHA, Variable Product Services, P. O. Box 8430, Omaha, Nebraska
68103-0430 1-800-238-9354
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
PAGE(S)
---------------------------------------------------------- --------
DEFINITIONS 3
---------------------------------------------------------- --------
INTRODUCTION AND SUMMARY 4-8
Comparison to Other Policies and Investments
How the Policy Operates
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ABOUT US 9
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INVESTMENT OPTIONS 9-16
Variable Investment Options
Fixed Rate Options
Transfers
Dollar Cost Averaging
STEP Program
Asset Allocation Program
Rebalancing Program
---------------------------------------------------------- --------
IMPORTANT POLICY PROVISIONS 17-22
---------------------------------------------------------- --------
Policy Application and
Issuance Telephone Transactions
Accumulation Value Reinstatement
Lapse and Grace Period Maturity Date
Paid-Up Life Insurance Coverage Beyond
Misstatement of Age or Maturity
Sex Delay of Payments
Suicide Minor Owner or
Incontestability Beneficiary
------------------------------ --------------------------- --------
EXPENSES 23-25
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Deductions from Premium Surrender Charge
Monthly Deduction Series Fund Charges
Transfer Charge
------------------------------ --------------------------- --------
POLICY DISTRIBUTIONS 26-30
Policy Loans Death Benefit
Surrender Payment of Proceeds
Partial Withdrawals
------------------------------ --------------------------- --------
FEDERAL TAX MATTERS 31-33
Life Insurance Other Policy Owner
Qualification Tax Matters
Tax Treatment of Loans
and Other Distributions
------------------------------ --------------------------- --------
MISCELLANEOUS 34-35
Our Management Legal Proceedings
Distribution of the Independent Auditors
Policies Reports to You
Voting Rights Do You Have Questions?
Distribution of Materials
State Regulation
------------------------------ --------------------------- --------
ILLUSTRATIONS 36-48
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FINANCIAL STATEMENTS 49-86
---------------------------------------------------------- --------
2
<PAGE>
- -----------------------------------------------------------
DEFINITIONS
ACCUMULATION VALUE is the dollar value of all amounts accumulated under the
Policy (in both the variable investment options and the fixed investment
options).
ALLOCATION DATE is the first Business Day following the completion of your
"right to examine period" .
BENEFICIARY is the person(s) or other legal entity who receives the death
benefits of the Policy, if any, upon the insured's death.
BUSINESS DAY is each day that the New York Stock Exchange is open for trading.
CASH SURRENDER VALUE is the Accumulation Value, less any Policy loans, unpaid
loan interest, and any applicable surrender charge.
LOAN ACCOUNT is an account we maintain for your Policy if you have a Policy loan
outstanding. The Loan Account is credited with interest and is not affected by
the experience of the Variable Account. The Loan Account is part of our general
account.
MONTHLY DEDUCTION is a monthly charge which includes a mortality and expense
risk charge, an administrative charge, a charge for the cost of any riders in
effect for that month and a cost of insurance charge.
NET AMOUNT AT RISK means the death benefit less the Accumulation Value on a
Monthly Deduction date after deducting the rider charges, if any, the risk
charge for the current month, and the administrative charge. If the Policy's
death benefit option is option 2, the Net Amount at Risk is the specified amount
of insurance coverage.
NO LAPSE PERIOD is a period of time during which the Policy will not lapse as
long as specified premiums are paid and no withdrawals are taken or Policy loans
are outstanding.
OWNER is you --- the person(s) who may exercise all rights and privileges under
the Policy.
POLICY is the Ultra Variable Life Policy, a flexible premium variable universal
life policy offered by us through this Prospectus.
POLICY YEAR/MONTH/ANNIVERSARY are measured from respective anniversary dates of
the date of issue of the Policy.
SERIES FUNDS are diversified, open-end investment management companies in which
the Variable Account invests.
SUBACCOUNT is a segregated account within the Variable Account investing in a
specified investment portfolio of one of the Series Funds.
US, WE, OUR, UNITED OF OMAHA is United of Omaha Life Insurance Company.
VALUATION PERIOD is the period commencing at the close of business of the New
York Stock Exchange on each Business Day and ending at the close of business on
the next succeeding Business Day.
VARIABLE ACCOUNT is United of Omaha Separate Account B, a separate account
maintained by us.
WRITTEN NOTICE is written notice, signed by you, that gives us the information
we require and is received at United of Omaha, Variable Product Services, P.O.
Box 8430, Omaha, Nebraska 68103-0430.
- -----------------------------------------------------------
THIS PROSPECTUS MAY ONLY BE USED TO OFFER THE POLICY WHERE THE POLICY
MAY LAWFULLY BE SOLD. NO ONE IS AUTHORIZED TO GIVE INFORMATION OR MAKE
REPRESENTATIONS ABOUT THE POLICY THAT ISN'T IN THE PROSPECTUS; IF ANYONE DOES
SO, YOU SHOULD NOT RELY UPON IT AS BEING ACCURATE OR ADEQUATE.
THIS PROSPECTUS GENERALLY DESCRIBES ONLY THE VARIABLE INVESTMENT
OPTIONS, EXCEPT WHEN THE FIXED RATE OPTIONS ARE SPECIFICALLY MENTIONED.
3
<PAGE>
- -----------------------------------------------------------
INTRODUCTION AND SUMMARY
THIS INTRODUCTION AND SUMMARY BRIEFLY NOTES SOME OF THE IMPORTANT THINGS
ABOUT THE POLICY, BUT IT IS NOT A COMPLETE DESCRIPTION OF THE POLICY. THE REST
OF THIS PROSPECTUS CONTAINS MORE COMPLETE INFORMATION, AND YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY.
The ULTRA VARIABLE LIFE Policy described in this Prospectus is a variable
universal life insurance policy issued by United of Omaha Life Insurance
Company. The Policy pays a death benefit upon the insured's death, and a Cash
Surrender Value is available if you surrender the Policy. The insured person
cannot be over 90 when we issue the Policy. You have flexibility under the
Policy; within certain limits, you can vary the amount and timing of premium
payments, change the death benefit, and transfer amounts among the investment
options. The minimum initial premium is the amount necessary to purchase
$100,000 of insurance coverage.
The Policy is a variable universal life Policy, which means that you can
allocate your premium to up to 30 different variable investment options, where
you can gain or lose money on your investment. You may also allocate your
premiums to up to two fixed rate options, where we guarantee you will earn a
fixed rate of interest. The death benefit can also vary up or down as a result
of that investment experience. However, the death benefit will not be less than
the current specified amount of insurance coverage less any outstanding Policy
loans and unpaid loan interest.
There is no guaranteed minimum Accumulation Value. Regardless of whether you
pay the planned premiums, the Policy could lapse if the Accumulation Value is
not sufficient to pay the Monthly Deduction. However, the Policy will not lapse
during the No-Lapse Period, if you pay the required premium.
The variable investment options are not direct investments in mutual funds,
but are Subaccounts of the Variable Account. Each Subaccount in turn invests in
a particular investment portfolio. You may transfer your Accumulation Value
among the Subaccounts and between the Subaccounts and the fixed rate options,
subject to certain restrictions (in particular, restrictions on transfers out of
the fixed rate options).
You can surrender the Policy completely, make a partial cash withdrawal, and
take out a Policy loan, subject to certain restrictions. However, surrenders,
withdrawals and loans may be taxable and subject to a penalty tax.
BUYING THE POLICY MIGHT NOT BE A GOOD WAY OF REPLACING EXISTING LIFE
INSURANCE, ESPECIALLY IF YOU ALREADY OWN A FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICY.
o COMPARISON TO OTHER POLICIES AND INVESTMENTS
A significant advantage of the Policy is that it
provides the ability to accumulate capital on a
tax-deferred basis. The purchase of a Policy to
fund a tax-qualified retirement account does not
provide any additional tax deferred treatment
beyond the treatment provided by the
tax-qualified retirement plan itself. However,
the Policy does provide benefits such as
lifetime income payments, family protection
through death benefits, guaranteed fees and
asset allocation models.
The Policy offered by this Prospectus is designed to provide life insurance
coverage for the insured. It is not offered primarily as an investment.
COMPARED TO OTHER LIFE INSURANCE POLICIES. In many respects, the Policy is
similar to fixed-benefit life insurance. Like fixed-benefit life insurance, the
Policy offers a death benefit and provides loan privileges and surrender values.
The Policy gives you the flexibility to vary the amount and timing of premium
payments and, within limits, to change the death benefit payable under the
Policy. The Policy is different from fixed-benefit life insurance in that the
death benefit may vary as a result of the investment experience of the variable
investment options that you select. The Accumulation Value will always vary in
accordance with that investment experience.
COMPARED TO MUTUAL FUNDS. The Policy is designed to provide life insurance
protection. Although the underlying investment portfolios operate like mutual
funds and have the same investment risks, in many ways the Policy differs from
mutual fund investments. The main differences are:
o The Policy provides a death benefit based on the life of the insured.
o The Policy can lapse with no value, if your Accumulation Value is not enough
to pay a Monthly Deduction unless the Policy is in a No-Lapse Period.
o Insurance-related charges not associated with mutual fund investments are
deducted from the values of the Policy.
o We, not you, own the shares of the underlying investment portfolios. You
have interests in our Subaccounts that invest in the investment portfolios
that you select.
4
<PAGE>
o Dividends and capital gains distributed by the investment portfolios are
automatically reinvested.
o Premiums paid are held in the Federated Prime Money Fund II portfolio until
the end of any "right to examine period" required by state law plus five
Business Days.
o Federal income tax liability on any earnings is deferred until you receive
a distribution from the Policy.
o Transfers from one underlying investment portfolio to another are
accomplished without tax liability.
o Premature withdrawals may be subject to a 10% federal tax penalty. Policy
earnings that would be treated as capital gains in a mutual fund are
treated as ordinary income, although (a) such earnings are exempt from
taxation if received as a death benefit, and (b) taxation is deferred until
such earnings are distributed.
o The Policy might be a "modified endowment contract." If it is, then (a)
there will be a 10% penalty tax on withdrawals before age 59 1/2; (b)
withdrawals would be deemed to come from earnings first (taxable), then
from your investment; and (c) loans will be treated as withdrawals.
o Most states grant you a time period to review your policy and cancel it for
a return of premium paid. The terms of this "right to examine" period vary
by state, and are stated on the cover of your Policy.
o HOW THE POLICY OPERATES
The following chart shows how the Policy operates and includes a summary of
expenses. For more information, refer to specific sections of this Prospectus.
----------------------------------------------------------------
POLICY FLOW CHART
----------------------------------------------------------------
PREMIUM
o The minimum initial premium required is based on the
initial specified amount of insurance coverage (minimum
amount of $100,000).
o Additional premium payments may be required pursuant to
a planned premium schedule. Payments in addition to
planned premiums may be made, within limits.
o Additional premiums may be required to prevent the
Policy from lapsing. Payment of the planned premiums may
not be enough to keep the Policy from lapsing, except in
some circumstances during the No-Lapse Period.
----------------------------------------------------------------
------------------------------------------------------------------
DEDUCTIONS BEFORE ALLOCATING PREMIUM Premium
Charges per premium payment:
o 3.75% of each premium for state and federal
tax expenses (which may be more or less than
the actual amount of federal and state tax
expense that we are required to pay).
o $2 from each premium for premium processing expenses.
------------------------------------------------------------------
-----------------------------------------------------------------------------
INVESTMENT OF PREMIUM
o You direct the allocation of all net premiums among the 30
Subaccounts of the Variable Account, the fixed account and the
systematic transfer account. Each Subaccount invests in a
corresponding investment portfolio of one of the Series Funds.
-------------------------------------------------------------------------------
---------------------------------------------------------------------------
CHARGES DEDUCTED FROM ASSETS
o We take a Monthly Deduction out of your Accumulation Value (the annual
rates set forth below are calculated as a percentage of Accumulation
Value) composed of:
- 0.70% for mortality and expense risk charge during Policy Years 1 - 10;
0.25% after Policy Year 10. The mortality and risk charge after Policy
Year 10 will never exceed the guaranteed maximum charge of 0.55%.
- $7 administrative charge.
- A cost of insurance charge (based on the Net Amount at Risk).
- Rider charges (if any).
o $10 fee for transfers among the Subaccounts and the fixed account
(first 12 transfers per Policy Year are free).
o Investment advisory fees and operating expenses are deducted from the
assets of each investment portfolio as described below.
-----------------------------------------------------------------------------
5
<PAGE>
--------------------------------------------------------------------------
ACCUMULATION VALUE
Your Accumulation Value is equal to your net premiums adjusted up or down
each Business Day to reflect your Subaccounts' investment experience,
earnings on amounts you have invested in the fixed account and the
systematic transfer accounts, charges deducted, and other Policy
transactions (such as loans and partial withdrawals).
o Accumulation Value may vary daily. There is no minimum guaranteed
Accumulation Value for the Subaccounts. The Policy may lapse, even if
there is no Policy loan.
o Accumulation Value can be transferred among the Subaccounts and
the fixed account. Policy loans reduce the amount available for
allocations and transfers.
o Dollar cost averaging and asset allocation and rebalancing programs
are available.
o Accumulation Value is the starting point for calculating certain values
under a Policy, such as the Cash Surrender Value and the death benefit.
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- -----------------------------------------
<S> <C>
ACCUMULATION VALUE BENEFITS DEATH BENEFIT
o After the first Policy Year (at any time in Indiana), o Received income tax free to
you can take loans for amounts up to 100% of Cash Beneficiary.
Surrender Value (less loan interest to the end of the o Available as lump sum or under
Policy Year and a sufficient Monthly Deduction to keep the a variety of payout
Policy in force for at least one month) at a net annual options.
interest rate charge of 2%. o Two death benefit options are
o Preferred loans are available beginning in the 10th available:
Policy Year and later with a net interest rate charge of (1) greater of (a) current
0%. All loans become preferred loans beginning in the specified amount; or (b)
10th Policy Year. Accumulation Value on the date of
o You can surrender the Policy in full at any time for death plus a corridor amount; or
its Cash Surrender Value, or withdraw part of the (2) Accumulation Value plus the
Accumulation Value (after the first Policy Year). A greater of (a) the current
surrender charge based upon issue age, sex, risk class, specified amount, or (b) a corridor
and the amount of time you have had your Policy, may apply amount.
to any surrender or reduction in the specified amount of o Flexibility to change death
insurance coverage for the first 12 Policy Years. The benefit option and specified amount
highest aggregate surrender charge is $53 for each $1,000 of insurance coverage.
of specified amount of insurance coverage. Taxes and tax o Rider benefits are available.
penalties may also apply to withdrawals.
o If the Policy is a modified endowment contract, then Death benefit proceeds paid are reduced
Policy loans will be treated as withdrawals for tax by any Policy loan balance and unpaid
purposes. loan interest.
o Fixed and variable payout options are available.
- ---------------------------------------------------------------- -----------------------------------------
</TABLE>
o SERIES FUND CHARGES
Each Series Fund investment portfolio is responsible for its own expenses.
The net assets of each portfolio reflects deductions for investment advisory
fees and other expenses. These charges are disclosed in each Series Fund's
prospectus which accompanies this Prospectus. Here is a table of portfolio
annual expenses:
6
<PAGE>
<TABLE>
<CAPTION>
Series Fund Annual Expenses/1 Total Portfolio
(as a percentage of average net assets) Management Other Expenses Annual Expenses
Fees ( after (after fee waiver
Portfolio: (after fee expense and expense
waiver)(a) reimbursement)(a)reimbursement)(a)
================================================= ================ ================ ===================
<S> <C> <C> <C>
Alger American Growth 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.05% 0.90%
Deutsche VIT EAFE Equity Index Fund (a) 0.26% 0.39% 0.65%
Deutsche VIT Small Cap Equity Index Fund (a) 0.13% 0.32% 0.45%
Federated Prime Money Fund II (a) 0.50% 0.23% 0.73%
Federated Fund for U.S. Government
Securities II (a) 0.60% 0.18% 0.78%
Fidelity VIP II Asset Manager (a) 0.58% 0.12% 0.70%
Fidelity VIP II Contrafund (a) 0.58% 0.07% 0.65%
Fidelity VIP Equity Income (a) 0.48% 0.08% 0.56%
Fidelity VIP II Index 500 (a) 0.24% 0.04% 0.28%
MFS Capital Opportunities Series (a) 0.75% 0.16% 0.91%
MFS Emerging Growth Series 0.75% 0.09% 0.84%
MFS Global Governments Series (a) 0.75% 0.16% 0.91%
MFS High Income Series (a) 0.75% 0.16% 0.91%
MFS Research Series 0.75% 0.11% 0.86%
MSDW Emerging Markets Equity (a) 0.42% 1.37% 1.79%
MSDW Fixed Income (a) 0.14% 0.56% 0.70%
Pioneer Equity-Income 0.64% 0.06% 0.70%
Pioneer Growth Shares 0.65% 0.11% 0.76%
Pioneer Fund 0.63% 0.07% 0.70%
Pioneer Midcap Value Fund 0.65% 0.11% 0.76%
Pioneer Real Estate Growth (a) 1.00% 0.14% 1.14%
Scudder VLIF Global Discovery (b), (d) 0.98% 0.90% 1.88%
Scudder VLIF Growth and Income (b) 0.48% 0.32% 0.80%
Scudder VLIF International 0.85% 0.18% 1.03%
T. Rowe Price Equity Income (c) 0.00% 0.85% 0.85%
T. Rowe Price International Stock (c) 0.00% 1.05% 1.05%
T. Rowe Price Limited Term Bond (c) 0.00% 0.70% 0.70%
T. Rowe Price New America Growth (c) 0.00% 0.85% 0.85%
T. Rowe Price Personal Strategy Balanced (c) 0.00% 0.90% 0.90%
- -------------------------------------------------------------------------------------------------------
(a) Without fee waiver or expense reimbursement limits, the following funds
would have had the charges set forth below:
TOTAL PORTFOLIO
PORTFOLIO MANAGEMENT FEES OTHER EXPENSES ANNUAL EXPENSES
-------------------------------------- ------------------ --------------- -------------------
Deutsche VIT EAFE Equity Index Fund 0.45% 0.69% 1.l5%
Deutsche VIT Small Cap Equity Index
Fund 0.35% 0.83% 1.18%
Federated Prime Money Fund II 0.50% 0.48% 0.98%
Federated Fund for U.S. Government
Securities II 0.60% 0.43% 1.03%
Fidelity VIP II Asset Manager 0.58% 0.13% 0.71%
Fidelity VIP II Contrafund 0.58% 0.09% 0.67%
Fidelity VIP Equity Income 0.48% 0.09% 0.57%
Fidelity VIP II Index 500 0.24% 0.10% 0.34%
MFS Capital Opportunities 0.75% 0.27% 1.02%
MFS Global Governments 0.75% 0.30% 1.05%
MFS High Income 0.75% 0.22% 0.97%
MSDW Emerging Markets Equity 1.25% 1.37% 2.62%
MSDW Fixed Income 0.40% 0.56% 0.96%
Pioneer Real Estate Growth 1.00% 0.30% 1.30%
-------------------------------------- ------------------ --------------- -------------------
(b) Other Expenses include a 0.25% 12b-1 fee assessed for payment of
distribution administration expenses.
(c) T. Rowe Price Funds do not itemize management fees and other expenses.
(d) Effective May 1, 2000, Scudder Kemper Investments has agreed to waive all or
a portion of its management fees to limit the expenses of the Global Discovery
Portfolio to 1.50% of the portfolio's average daily net assets. These expenses
will remain in effect until at least April 30, 2001.
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------
/1 The fee and expense data regarding each Series Fund, which are fees and
expenses for 1999, was provided to United of Omaha by the respective Series
Fund. The Series Funds are not affiliated with United of Omaha. We have not
independently verified these figures.
7
<PAGE>
The ILLUSTRATIONS section at the end of this Prospectus has tables demonstrating
how the Policy operates, given the Policy's expenses and several assumed rates
of return. These tables may assist you in comparing the Policy's death benefits,
Cash Surrender Values and Accumulation Values with those of other variable life
insurance policies. Please review these tables to better understand the effect
of expenses upon the Policy. You may also ask us to provide a comparable
illustration based upon your specific situation.
FOR POLICIES ISSUED IN THE STATE OF FLORIDA
THIS NOTICE IS TO REMIND YOU OF RIGHTS PROVIDED BY FLORIDA LAW, CHAPTER
627.4555. You may designate a person, in addition to yourself, who would be told
when your premium is past due and has not been paid. This secondary addressee
will only be sent notification if the insured is age 64 or older and the Policy
has been in force for at least one year. Notification of possible lapse in
coverage will be sent to you and the person you designate to be the secondary
addressee at least 21 days before expiration of the grace period provided in
your Policy.
If you would like to take advantage of this feature, please contact Variable
Products Services area at 1-800-238-9354.
For more detailed information about the Policy,
please read the rest of this Prospectus and the Policy.
8
<PAGE>
- -----------------------------------------------------------
ABOUT US
We are United of Omaha Life Insurance Company, a stock life insurance
company organized under the laws of the State of Nebraska in 1926. We are a
wholly-owned subsidiary of Mutual of Omaha Insurance Company. The Mutual of
Omaha family of companies provide life, health, disability, home and auto
insurance, trust services, and investment sales and brokerage services. The
Mutual of Omaha Companies have a proud tradition of supporting environmental
education, beginning with its long-running MUTUAL OF OMAHA'S WILD KINGDOM
television program, and continued through its Wildlife Heritage Trust. United of
Omaha is principally engaged in the business of issuing group and individual
life insurance and annuity policies, and group accident and health insurance in
all states (except New York), and the District of Columbia. As of December 31,
1999, United of Omaha had assets of over $10 billion.
We may from time to time publish (in advertisements, sales literature and
reports to Policy Owners) the ratings and other information assigned to us by
one or more independent rating organizations such as A.M. Best Company, Moody's
Investors Service, Inc., Standard & Poor's Rating Services, and Duff & Phelps
Credit Rating Company. The purpose of the ratings is to reflect our financial
strength and/or claims-paying ability. The ratings do not bear on the investment
performance of assets held in the Variable Account or on the safety or the
degree of risk associated with an investment in the Variable Account.
- -----------------------------------------------------------
INVESTMENT OPTIONS
The investment results of each investment
portfolio, whose investment objectives are
described below, are likely to differ
significantly. You should consider carefully,
and on a continuing basis, which investment
portfolios or combination of investment
portfolios and fixed rate options best suits
your long-term investment objectives.
We recognize you have very personal goals and investment strategies. The
Policy allows you to choose from a wide array of investment options -- each
chosen for its potential to meet specific investment objectives. You may
allocate all or a part of your premiums to one or a combination of the variable
investment options or the fixed rate options (although allocations to the
systematic transfer account are limited to initial premium and rollovers only).
Allocations must be in whole percentages and total 100%.
You can choose among 30 variable investment options and two-fixed rate
options.
o VARIABLE INVESTMENT OPTIONS
The investment portfolios are not available for
purchase directly by the general public, and are
not the same as other mutual fund portfolios
with very similar or nearly identical names that
are sold directly to the public. However, the
investment objectives and policies of certain
investment portfolios available under the Policy
are very similar to the investment objectives
and policies of other portfolios that are or may
be managed by the same investment adviser or
manager. Nevertheless, the investment
performance and results of the investment
portfolios available under the Policy may be
lower, or higher, than the investment results of
such other (publicly available) portfolios.
There can be no assurance, and no representation
is made, that the investment results of any of
the investment portfolios available under the
Policy will be comparable to the investment
results of any other mutual fund portfolio, even
if the other portfolio has the same investment
adviser or manager and the same investment
objectives and policies, and a very similar
name.
For detailed information about any investment
portfolio, including its performance history,
refer to the prospectus for that investment
portfolio.
With the Policy's variable investment options, you bear the investment
risk, not us. You control the amount of money you invest in each of the
investment portfolios, and you bear the risk those portfolios will perform worse
than you expect.
The Variable Account, United of Omaha Separate Account B, provides you
with 30 variable investment options in the form of Series Fund investment
portfolios. Each Series Fund is an open-end investment management company. When
you allocate Policy funds to a Series Fund portfolio, those funds are placed in
a Subaccount of the Variable Account corresponding to that portfolio, and the
Subaccount in turn invests in the portfolio. The Accumulation Value of your
Policy depends directly on the investment performance of the portfolios that you
select.
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------- ---------------------------------------------------- ------------------------------------
Variable Investment Options
Asset Under United of Omaha Separate Account B Objective
Category * (Series Fund - Portfolio)
- ------------------- -----------------------------------------------------------------------------------------
Investments
- -------------------- ---------------------------------------------------- ------------------------------------
<S> <C> <C> <C>
MFS Variable Insurance Trust -
MFS EMERGING GROWTH SERIES PORTFOLIO (5) Long-term capital appreciation.
AGGRESSIVE
GROWTH
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of emerging growth companies.
- ------------------- -----------------------------------------------------------------------------------------
Alger American Fund -
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO (1) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of small capitalization companies.
- ------------------- -----------------------------------------------------------------------------------------
Deutsche Asset Management VIT Funds -
DEUTSCHE VIT SMALL CAP EQUITY INDEX FUND Long-term capital appreciation.
Portfolio(12)
- ------------------- -----------------------------------------------------------------------------------------
Common stock of small capitalization companies.
- ------------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Long-term capital appreciation
REAL ESTATE PIONEER REAL ESTATE GROWTH PORTFOLIO (8) with current income.
- ------------------- ---------------------------------------------------- ------------------------------------
Real estate investment trusts (REITs) and other
real estate industry companies.
- ------------------- -----------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc. -
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO (10) Long-term capital appreciation.
INTERNATIONAL
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of non-U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
SCUDDER VLIF INTERNATIONAL PORTFOLIO (9) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of non-U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
SCUDDER VLIF GLOBAL DISCOVERY PORTFOLIO (9) Long-term capital appreciation.
- ------------------- -----------------------------------------------------------------------------------------
Common stock of small U.S. and non-U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. -
MSDW EMERGING MARKETS EQUITY PORTFOLIO (6) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Equity securities of growth companies located in
"emerging" foreign countries (countries whose
economies are less economically mature than those
of developed nations).
- ------------------- -----------------------------------------------------------------------------------------
Deutsche Asset Management VIT Funds - Long-term capital appreciation.
DEUTSCHE VIT EAFE EQUITY INDEX FUND PORTFOLIO(12)
- ------------------- -----------------------------------------------------------------------------------------
Common stock of non-U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust -
BOND - MFS HIGH INCOME SERIES PORTFOLIO (5) High current income.
HIGH YIELD
- ------------------- ---------------------------------------------------- ------------------------------------
High yield, lower-rated bonds or comparable
unrated securities.
- ------------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. -
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO (11) Long-term capital appreciation.
GROWTH
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of U.S. growth companies.
10
<PAGE>
- ------------------- ---------------------------------------------------- ------------------------------------
Variable Investment Options
Asset Under United of Omaha Separate Account B Objective
Category * (Series Fund - Portfolio)
------------------ -----------------------------------------------------------------------------------------
Investments
- ------------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust - Long-term capital appreciation
MFS RESEARCH SERIES PORTFOLIO (5) and future income.
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock or comparable securities of
companies expected to possess better-than-average
prospects for long-term growth.
- ------------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II -
FIDELITY VIP II CONTRAFUND PORTFOLIO (3) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of companies, foreign and domestic,
which the fund manager believes are currently
undervalued.
- ------------------- -----------------------------------------------------------------------------------------
Alger American Fund -
ALGER AMERICAN GROWTH PORTFOLIO (1) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Equity securities of companies with total market
capitalization of $1 billion or more.
- ------------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust -
PIONEER MIDCAP VALUE FUND PORTFOLIO (8) Long-term capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Securities of mid-size companies, which the fund
manager believes are currently undervalued.
- ------------------- ---------------------------------------------------- ------------------------------------
MFS Variable Insurance Trust -
MFS CAPITAL OPPORTUNITIES SERIES PORTFOLIO (5) Capital appreciation.
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock and related securities of foreign
and domestic companies.
- ------------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Capital appreciation.
PIONEER GROWTH SHARES PORTFOLIO(8)
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock and equity securities of U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II - Capital appreciation
FIDELITY VIP II INDEX 500 PORTFOLIO (3) with current income.
GROWTH &
INCOME
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of companies that comprise the S&P
500 index.
- ------------------- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund - Long-term capital appreciation
SCUDDER VLIF GROWTH AND INCOME PORTFOLIO (9) with current income.
- ------------------- ---------------------------------------------------- ------------------------------------
Common and preferred stock, and securities
convertible into common stock, of companies that
offer the prospect for growth while paying
current dividends.
- ------------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust -
PIONEER FUND PORTFOLIO(8) Current income and
capital appreciation.
- ------------------- -----------------------------------------------------------------------------------------
Equity securities, primarily of U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc. - Dividend income and long-term
T. ROWE PRICE EQUITY INCOME PORTFOLIO (11) capital appreciation.
EQUITY
INCOME
- ------------------- ---------------------------------------------------- ------------------------------------
Common stock of established companies that pay
dividends.
- ------------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund - Dividend income and capital
FIDELITY VIP EQUITY INCOME PORTFOLIO (3) appreciation surpassing
the S&P 500 average.
- ------------------- ---------------------------------------------------- ------------------------------------
Securities of established companies that produce
income and capital appreciation.
- ------------------- -----------------------------------------------------------------------------------------
Pioneer Variable Contracts Trust - Current income and long-term
PIONEER EQUITY-INCOME PORTFOLIO(8) capital appreciation.
- ------------------- -----------------------------------------------------------------------------------------
Income producing equity securities of U.S. companies.
- ------------------- -----------------------------------------------------------------------------------------
T. Rowe Price Equity Series, Inc.
T. ROWE PRICE PERSONAL STRATEGY BALANCED Capital appreciation and income.
BALANCED PORTFOLIO(11)
- ------------------- ---------------------------------------------------- ------------------------------------
Diversified portfolio of stock, bonds and money
market securities.
- ------------------- -----------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund II -
FIDELITY VIP II ASSET MANAGER PORTFOLIO (3, 4) High total return.
- ------------------- ---------------------------------------------------- ------------------------------------
Diversified portfolio of domestic and foreign
stock, bonds, short-term and money market
securities.
- ------------------- -----------------------------------------------------------------------------------------
MFS Variable Insurance Trust -
BOND - MFS GLOBAL GOVERNMENTS SERIES PORTFOLIO (5) Income and capital appreciation.
INTERNATIONAL
- ------------------- ---------------------------------------------------- ------------------------------------
Foreign and U.S. government bonds or other debt securities.
- ------------------- -----------------------------------------------------------------------------------------
Federated Insurance Series -
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II Current income.
PORTFOLIO(2)
BOND -
DOMESTIC
- ------------------- -----------------------------------------------------------------------------------------
U.S. government securities.
- ------------------- -----------------------------------------------------------------------------------------
T. Rowe Price Fixed Income Series, Inc. -
T. ROWE PRICE LIMITED TERM BOND PORTFOLIO (11) Current income.
- ------------------- ---------------------------------------------------- ------------------------------------
Short- and intermediate-term investment grade
debt securities.
- ------------------- -----------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. -
MSDW FIXED INCOME PORTFOLIO (7) Current income.
- ------------------- ---------------------------------------------------- ------------------------------------
Diversified portfolio of fixed income securities.
- ------------------- ---------------------------------------------------- ------------------------------------
Federated Insurance Series - Current income.
MONEY MARKET FEDERATED PRIME MONEY FUND II PORTFOLIO (2)
- ------------------- -----------------------------------------------------------------------------------------
High quality fixed income securities maturing in
13 months or less.
- ------------------- -----------------------------------------------------------------------------------------
(*) Asset category designations are our own to help you gain insight into each
portfolio's intended objectives, but do not assure that any portfolio will
perform consistent with the categorization. INFORMATION CONTAINED IN THE SERIES
FUNDS' PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE INVESTING IN ANY SUBACCOUNT.
</TABLE>
11
<PAGE>
We do not assure that any portfolio will achieve
its stated objective. Detailed information,
including a description of each portfolio's
investment objective and policies, a description
of risks involved in investing in each of the
portfolios, and each portfolio's fees and
expenses, is contained in the prospectuses for
the Series Funds, current copies of which
accompany this Prospectus. None of these
portfolios are insured or guaranteed by the U.S.
government.
INVESTMENT ADVISERS OF THE SERIES FUNDS:
(1) Fred Alger Management, Inc.
(2) Federated Investment Management Company.
(3) Fidelity Management & Research Company.
(4) Fidelity Management & Research (U.K.) Inc., and Fidelity
Management and Research Far East Inc., regarding research and
investment recommendations with respect to companies based
outside the United States.
(5) Massachusetts Financial Services Company.
(6) Morgan Stanley Dean Witter Investment Management Inc.
(7) Miller Anderson & Sherrerd, LLP.
(8) Pioneer Investment Management, Inc.
(9) Scudder Kemper Investments, Inc.
(10) Rowe Price-Fleming International, Inc., a joint venture
between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
(11) T. Rowe Price Associates, Inc.
(12) Bankers Trust Company.
The investment advisers of the Series Funds and the investment portfolios
are described in greater detail in the prospectuses for the Series Funds.
Each investment portfolio is designed to provide an investment vehicle for
variable annuity and variable life insurance contracts issued by various
insurance companies. For more information about the risks associated with the
use of the same funding vehicle for both variable annuity and variable life
insurance contracts of various insurance companies, see the prospectuses of the
Series Funds which accompany this Prospectus.
We may receive revenues from the investment portfolios or their investment
advisers. These revenues may depend on the amount our Variable Account invests
in the Series Fund and/or any portfolio thereof.
The Variable Account is registered with the SEC as a unit investment trust.
However, the SEC does not supervise the management or the investment practices
or policies of the Variable Account or United of Omaha. The Variable Account was
established as a separate investment account of United of Omaha under Nebraska
law on August 27, 1996. Under Nebraska law, we own the Variable Account assets,
but they are held separately from our other assets and are not charged with any
liability or credited with any gain of business unrelated to the Variable
Account. Any and all distributions made by the Series Funds with respect to the
shares held by the Variable Account will be reinvested in additional shares at
net asset value. We are responsible to you for meeting the obligations of the
Policy, but we do not guarantee the investment performance of any of the
investment portfolios. We do not make any representations about their future
performance. The investment portfolios may fail to meet their objectives, and
they could go down in value. Each portfolio operates as a separate investment
fund, and the income or losses of one portfolio generally have no effect on the
investment performance of any other portfolio. Complete descriptions of each
portfolio's investment objectives and restrictions and other material
information related to an investment in the portfolio are contained in the
prospectuses for each of the Series Funds which accompany this Prospectus.
o ADDING, DELETING, OR SUBSTITUTING VARIABLE OPTIONS
We do not control the Series Funds, so we cannot guarantee that any of the
investment portfolios will always be available. We retain the right to change
the investments of the Variable Account. This means we may eliminate the shares
of any investment portfolio held in our Variable Account and to substitute
shares of another open-end management investment company for the shares of any
portfolio, if the shares of the portfolio are no longer available for investment
or if, in our judgment, investment in any portfolio would be inappropriate in
view of the purposes of the Variable Account. We will first notify you and
receive any necessary SEC and state approval before making such a change.
New portfolios may be added, or existing portfolios eliminated, when, in our
sole discretion, conditions warrant such a change. If a portfolio is eliminated,
we will ask you to reallocate any amount in the eliminated portfolio. If you do
not reallocate these amounts, we will automatically reinvest them in the
Federated Prime Money Fund II portfolio.
If we make a portfolio substitution or change, we may change the Policy to
reflect the substitution or change. Our Variable Account may be (i) operated as
an investment management company or any other form permitted by law, (ii)
deregistered with the SEC if registration is no longer required or (iii)
combined with one or more other separate accounts. To the extent permitted by
law, we also may transfer assets of the Variable Account to other accounts.
12
<PAGE>
o FIXED RATE OPTIONS
The actual net effective minimum interest rate,
after deduction of the mortality and expense
risk charge, is guaranteed to yield 3.3% per
year (compounded annually) for the first 10
Policy Years and 3.45% per year thereafter
(except in Maryland, where the minimum net rates
will yield -0.7% per year for the first ten
Policy Years and -0.55% per year thereafter).
There are two fixed rate options: a systematic transfer account and a fixed
account. With fixed rate options, we bear the investment risk. This means we
guarantee that you will earn a minimum interest rate. This minimum interest rate
is guaranteed to yield 4.0% per year, compounded annually, in all states except
Maryland (the minimum rate is guaranteed to yield 0.0% for policies issued in
Maryland). We may declare a higher current interest rate. Whatever interest rate
we declare will be guaranteed for at least one year. However, you bear the risk
that we will not credit more interest than will yield 4.0% per year (or more
than 0.0% in Maryland) for the life of the Policy. We have full control over how
assets allocated to fixed rate options are invested, and we bear the risk that
those assets will perform better or worse than the amount of interest we have
declared. The focus of this Prospectus is to disclose the Variable Account
aspects of the Policy. For additional details regarding the fixed investment
options, see the Policy.
o SYSTEMATIC TRANSFER ACCOUNT (MAY NOT BE AVAILABLE IN ALL STATES)
All amounts allocated to the fixed rate options
become part of the general account assets of
United of Omaha. Interests in the general
account have not been registered with the SEC
and are not subject to the SEC's regulation, nor
is the general account registered as an
investment company with the SEC. Therefore, SEC
staff have not reviewed the fixed account
disclosures in this Prospectus.
The systematic transfer account is the fixed rate option used if you elect
to participate in the systematic transfer enrollment program ("STEP program")
when you buy the Policy. The STEP program is used to automatically transfer a
predetermined dollar amount on a monthly basis to any of the Subaccounts you
choose. You cannot transfer amounts from the STEP program to the fixed account.
The allocation and the predetermined dollar amount may not be changed once the
STEP program is elected. You must have a minimum of $5,000 in your systematic
transfer account in order to participate in the STEP program. No additional
funds may be allocated to a systematic transfer account after you purchase the
Policy (except for funds designated to be transferred into the Policy pursuant
to an Internal Revenue Code Section 1035 exchange).
Funds allocated to the systematic transfer account must be completely
transferred to the Variable Account in 12 months. Transfers from the systematic
transfer accounts do not count toward the 12 free transfers allowed each Policy
Year. You may not transfer funds into any systematic transfer account. The
systematic transfer account may not be used to practice "market timing", and we
may disallow transactions involving this account on that basis.
o FIXED ACCOUNT AND SYSTEMATIC TRANSFER ACCOUNT
We have sole discretion to set current interest
rates of fixed rate options. We do not guarantee
the level of future interest rates of fixed rate
options, except that they will not be less than
the guaranteed minimum interest rate.
The fixed account and the systematic transfer account are part of our
general account assets. Our general account includes all our assets except those
segregated in the Variable Account or in any other separate investment account.
You may allocate premiums to the fixed account or transfer amounts from the
Variable Account to the fixed account. Instead of you bearing the investment
risk, as you do with investments allocated to the Variable Account, we bear the
full investment risk for investments in the fixed rate options. We have sole
discretion to invest the assets of our general account, subject to applicable
law.
We have complete discretion to declare interest in excess of the guaranteed
minimum rate, or not to declare any excess interest. However, once declared, we
guarantee that any rate will last for at least one year. Different rates of
interest may be credited to the systematic transfer account and the fixed
account.
We guarantee that, prior to the payment of the death benefit or at the Policy
maturity date, the amount in your fixed account or systematic transfer account
will be not be less than:
(i) the amount of premiums allocated and Accumulation Value
transferred to the fixed account or systematic transfer account,
plus
(ii) interest at the guaranteed minimum interest rate, plus
(iii) excess interest (if any) credited to amounts in the fixed
account or systematic transfer account, less
(iv) that part of the Monthly Deduction allocated to the fixed
account or systematic transfer account, less
(v) any premium taxes or other taxes allocable to the fixed account
or systematic transfer account, and less
(vi) any amounts deducted from the fixed account or systematic
transfer account in connection with partial withdrawals
(including any surrender charges) or transfers to the Variable
Account or to a loan account.
13
<PAGE>
o TRANSFERS
The Policy is designed for long-term investment, not for active trading or
"market timing." Excessive transfers could harm other Policy Owners by having a
detrimental effect on portfolio management. Subject to restrictions during the
"right to examine" period, you may transfer Policy value from one Subaccount to
another, from the Variable Account to the fixed account, or from the fixed
account to any Subaccount, subject to these rules:
TRANSFER RULES:
o We must receive notice of the transfer --- either Written Notice or an
authorized telephone transaction.
o The transferred amount must be at least $500, or the entire Subaccount value
if it is less. (If the Subaccount value remaining after a transfer will be
less than $500, we will include that amount as part of the transfer.)
o The first 12 transfers each Policy Year from Subaccounts are free. The rest
cost $10 each. We will allow no more than 24 transfers in any Policy Year.
This fee is deducted from the amount transferred.
o A transfer from the fixed account:
- - may be made only once each Policy Year;
- - is free;
- - may be delayed up to six months (30 days in West Virginia)
- - does not count toward the 12 free transfer limit; and
- - is limited during any Policy Year to 10% of the fixed account
value on the date of the initial
transfer during that year.
o We reserve the right to limit transfers, or to modify transfer privileges
and we reserve the right to change the transfer rules at any time.
o If the Accumulation Value in any Subaccount falls below $500, we may
transfer the remaining balance, without charge, to the Federated Prime Money
Fund II portfolio.
o Transfers made pursuant to participation in the dollar cost averaging, asset
allocation, STEP or rebalancing programs are not subject to the amount or
timing limitations of these rules, nor are they subject to a transfer
charge. See the sections of this Prospectus describing those programs for
the rules of each program.
o If you transfer amounts from the fixed account to the Variable Account, we
can restrict or limit any transfer of those amounts back to the fixed
account.
THIRD-PARTY TRANSFERS. Where permitted and subject to our rules, we may
accept your authorization to have a third party exercise transfers on your
behalf. Third-party transfers are subject to the same rules as all other
transfers.
o DOLLAR COST AVERAGING
The dollar cost averaging and the STEP program
are intended to result in the purchase of more
accumulation units when the accumulation unit
value is low, and fewer units when the
accumulation unit value is high. However, there
is no guarantee that either program will result
in higher Accumulation Value or otherwise be
successful.
Our dollar cost averaging program allows you to automatically transfer, on a
periodic basis, a set dollar amount or percentage from one Subaccount or the
fixed account to any Subaccount(s). You can begin dollar cost averaging when you
purchase the Policy or later. You can increase or decrease the amount or
percentage of transfers or discontinue the program at any time. Rules of the
dollar cost averaging program are:
DOLLAR COST AVERAGING RULES:
o The dollar cost averaging program is free.
o We must receive notice of your election and any changed instruction ---
either Written Notice or an authorized telephone transaction.
o Automatic transfers can occur monthly, quarterly, semi-annually, or annually.
o There must be at least $5,000 of Accumulation Value in the Subaccount or
fixed account from which transfers are being made to begin dollar cost
averaging.
o Amount of each transfer must be at least $100, and must be $50 per
Subaccount.
o If transfers are made from the fixed account, the maximum annual transfer
amount is 10% of that account's value at the time of the first dollar cost
averaging transfer during that Policy Year. There is no maximum transfer
amount limitation applicable to any of the Subaccounts.
o Dollar cost averaging program transfers cannot begin before the end of a
Policy's "right to examine" period.
o You may specify that transfers be made on the 1st through the 28th day of
the month. Transfers will be made on the date you specify (or if that is not
a Business Day, then on the next Business Day). If you do not select a date,
the program will begin on the next Policy Monthly Anniversary following the
date the Policy's "right to examine" period ends.
o You can limit the number of transfers to be made, in which case the
program will end when that number has been made. Otherwise, the program will
terminate when the amount remaining in the applicable Subaccount or the
fixed account is less than $500.
14
<PAGE>
o SYSTEMATIC TRANSFER ENROLLMENT
PROGRAM ("STEP PROGRAM")
You cannot transfer amounts from the STEP
account to the fixed account.
The STEP program allows you to automatically transfer funds on a monthly
basis from the systematic transfer account to any other Subaccount. It allows
you to use a dollar cost averaging concept to move your initial premium from a
fixed interest rate account into variable investment options within a 12-month
period. You cannot transfer funds from the STEP account into the fixed account.
If you want to move funds from a fixed interest rate account into variable
investment options over a longer time period using the same concept, then you
should use the dollar cost averaging program. We may credit different interest
rates to amounts in the systematic transfer account than to amounts in the fixed
account.)
STEP PROGRAM RULES:
o The STEP program is free.
o Can only be selected on the initial application.
o Must have at least $5,000 in the systematic transfer account to begin
the program.
o Amount transferred each month must be at least an amount sufficient to
transfer the entire amount out of the systematic transfer account in 12
equal monthly payments.
o Transfers must be at least $50 per Subaccount.
o No new premiums may be allocated to this account after you purchase the
Policy, except for funds designated in the application to be transferred
into the Policy pursuant to an Internal Revenue Code Section 1035 exchange.
o Upon receipt of funds by Section 1035 exchange, the 12 monthly payment
requirement is restarted and the minimum monthly transfer amount is
recalculated.
o Cannot begin before the end of the Policy's "right to examine" period.
o You may specify that transfers be made on the 1st through the 28th day of
the month. Transfers will be made on the date you specify (or if that is not
a Business Day, the transfer will be made on the next Business Day). If you
do not select a start date, the STEP program will begin on the next Policy
Monthly Anniversary following the date the Policy's "right to examine"
period ends.
o No transfers may be made into the systematic transfer account.
o All funds remaining in the systematic transfer account on the date of
the last monthly transfer will be transferred to the Subaccounts in a pro
rata amount consistent with your allocation instructions.
o The STEP program ends the earlier of the date when all amounts in the
systematic transfer account have been transferred or the date of the last
monthly STEP program transfer.
o ASSET ALLOCATION PROGRAM
The asset allocation program does not protect
against a loss, and otherwise is not guaranteed
to achieve your goal
The asset allocation program allows you to allocate premiums and Policy
value among designated Subaccounts and the fixed account. You can specify your
own desired allocation instructions, or you can choose to use one of the five
asset allocation models outlined below. The fixed rate options are not included
in this program.
ASSET ALLOCATION PROGRAM RULES:
o The asset allocation program is free.
o You must request the asset allocation program in the Policy application or
by Written Notice or an authorized telephone transaction.
o Changed instructions, or a request to end this program, must also be by
Written Notice or an authorized telephone transaction.
o You must have at least $10,000 of Accumulation Value (other than amounts in
a Loan Account) to begin the asset allocation program.
o Transfers made pursuant to this program do not count in determining whether
a transfer fee applies.
o Asset allocation and STEP programs cannot run at the same time.
o The asset allocation program will automatically rebalance your Accumulation
Value in the Subaccounts to the model you select on an annual basis, unless
you designate semiannual or quarterly rebalancing. Your Accumulation Value
will be rebalanced to the then-current version of the model in effect.
o The Series Funds that are included in a model may change from period to
period. Your election to use a model will remain in effect, without regard
to changes in the funds in that model, unless you provide us with changed
instructions.
15
<PAGE>
The asset allocation program does not protect against a loss, and otherwise is
not guaranteed to achieve your goal.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ASSET ALLOCATION MODELS
CURRENT ALLOCATIONS*
- ------------------------------------ ------------- ------------- ----------- -------------- ------------
Portfolio Principal Portfolio Income Capital Equity
Conserver Protector Builder Accumulator Maximizer
(conservative)(moderately (moderate) (moderately (aggressive)
conservative) aggressive)
% % % % %
- ------------------------------------ ------------- ------------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
MFS Emerging Growth Series 3 5
Alger American Small Capitalization 5 10
Deutsche Small Cap Equity Index 3 4 6 7
VIT Fund
Pioneer Real Estate Growth 4 5 6
T. Rowe Price International Stock 6 7 12
Scudder VLIF International 15
Deutsche EAFE Equity Index VIT Fund 5 7 9 9 10
MFS High Income Series 5 5 5
T. Rowe Price New America Growth 5 7 9
MFS Capital Opportunities Series 4 8 10 10 9
Fidelity VIP II Index 500 5 10 10 11 12
Fidelity VIP Equity Income 5 9 11
Pioneer Equity Income 7 10 10 8 6
MFS Global Governments Series 5 6 6
T. Rowe Price Limited Term Bond 43 32 20 15
MSDW Fixed Income 6
Federated Prime Money Fund II 20 13 5
- --------------------------------------------------------------------------------------------------------
* WE RETAIN THE RIGHT TO CHANGE ALLOCATION MODEL ALLOCATIONS OR TO SUBSTITUTE
PORTFOLIO OPTIONS THEREIN IN FUTURE PROSPECTUSES. AMOUNTS YOU ALLOCATE TO A
MODEL PORTFOLIO WILL BE INVESTED PURSUANT TO THE THEN CURRENT PORTFOLIO
ALLOCATIONS FOR THAT MODEL.
- --------------------------------------------------------------------------------------------------------
</TABLE>
We use Ibbotson Associates, Inc. to develop the asset allocation model
allocations. They are an investment consulting firm specializing in applying
investment theories and empirical findings (such as historical return data
collected on the investment portfolios) to quantify the benefits of
diversification for particular investment profiles.
o REBALANCING PROGRAM
The rebalancing program allows you to rebalance your Accumulation Value
among designated Subaccounts and the fixed account pursuant to your instructions
on a quarterly, semi-annual, or annual basis. Rebalancing utilizes your
allocation instructions in effect at the end of the STEP program period (so it
never rebalances any assets to the systematic transfer account). You may change
your rebalancing allocation instructions at any time. Any change will be
effective when the next rebalancing occurs.
REBALANCING PROGRAM RULES:
o The rebalancing program is free.
o You must request the rebalancing program and give us your rebalancing
instructions by Written Notice. Changed instructions or a request to end
this program must also be by Written Notice.
o You must have at least $10,000 of Policy Accumulation Value (other than
amounts in a Loan Account) to begin the rebalancing program.
o You may have rebalancing occur quarterly, semi-annually or annually.
o Transfers made pursuant to this program do not count in determining whether a
transfer fee applies.
o If you elect the asset allocation program, your Accumulation Value in the
Subaccounts will automatically be rebalanced to the model you choose on an
annual basis, unless you elect semi-annual or quarterly rebalancing. You
Accumulation Value will be rebalanced to the then-current version of the model
in effect.
The rebalancing program does not protect against a loss and may not achieve your
goal.
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IMPORTANT POLICY PROVISIONS
The Ultra Variable Life Policy is a flexible premium variable universal life
insurance policy. The Policy provides a death benefit and, as a variable
insurance policy, allows you to invest your Accumulation Value in variable or
fixed investment options where any gain accumulates on a tax-deferred basis.
Some key rights and benefits under the Policy are summarized in this Prospectus;
however, you must refer to the Policy for the actual terms of the Policy. You
may obtain a copy of the Policy from us. The Policy remains in force until
surrendered for its Cash Surrender Value, or until all proceeds have been paid
as a death benefit, or until it lapses because premiums paid and its
Accumulation Value are insufficient to keep the Policy in force and the No-Lapse
Period is not in effect, or if a Policy loan exists, the Cash Surrender Value is
equal to or less than the amount of the loan.
o POLICY APPLICATION AND ISSUANCE
Replacing an existing life insurance policy is
not always your best choice. Evaluate any
replacement carefully.
To purchase a Policy, you must submit an application with the minimum
initial premium and provide evidence of the proposed insured's insurability.
Before accepting an application, we conduct underwriting to determine
insurability. We reserve the right to reject any application or premium for any
reason. If your application is in good order upon receipt, we will credit your
initial premium on the date the Policy is issued. All premiums are allocated to
the Federated Prime Money Fund II portfolio until the end of the "right to
examine" period, and only then to your selected investment allocations. If a
Policy is not issued, we will return your premium. If we issue a Policy, it will
be effective on the date of issue.
o APPLICATION IN GOOD ORDER. All application questions must be answered,
but particularly note these requirements:
- - Your full name, Social Security number, and date of birth must be included.
- - The Beneficiary's full name, Social Security number, and other information
must be included.
- - Your premium allocations must be completed, be in whole percentages, and
total 100%.
- - Initial premium must meet minimum initial premium requirements.
- - Your signature and your agent's signature must be on the application.
- - City, state, and date application was signed must be completed.
- - You must provide all information required for us to underwrite your
application (including health and
medical information about the insured, and other information we deem
relevant).
- - Your agent must be both properly licensed and appointed with us.
o PREMIUM PAYMENTS. Your premium checks should be made payable to "United
of Omaha Life Insurance Company." We may postpone crediting to your Policy any
payment made by check until your bank has honored the check. Payment by
certified check, banker's draft, or cashier's check will be promptly applied.
You may change your premium allocation instructions by sending us Written Notice
or through an authorized telephone transaction. The change will be effective on
the date we receive your Written Notice or authorization. The change will apply
to any additional premiums received on or after the date we receive your Written
Notice or authorization.
Initial Premium Payment:
-----------------------
- - Must be enough to purchase $100,000 of insurance coverage, or a greater
specified amount.
- - The net premium is invested in the Federated Prime Money Fund II until
the end of the "right to examine" period.
Additional Premium Payments:
---------------------------
- - Additional premiums can only be made until the insured's age 100 (except
as may be required in a grace period).
- - If a premium increases the specified amount of coverage, it is subject
to the insured's continued insurability and our underwriting
requirements, which may include evidence of continued insurability.
- - Must be at least enough to maintain the specified amount of coverage you
purchased.
- - Planned premiums may be paid annually, semiannually, or at other
intervals we offer. Beginning with the second Policy Year, you may
change the planned premium once each year, subject to our approval. The
planned premium is flexible. Because the Policy's Accumulation Value can
fluctuate depending upon the performance of your selected variable
investment options, payment of the planned premiums does not guarantee
that your Policy will remain in force. Your Policy can lapse even if you
pay all planned premiums on time. However, there may be a "no lapse"
guaranty, described below.
- - If there is a Policy loan, you should identify any payment intended to
reduce a loan as a loan repayment, otherwise it will be treated as a
premium and added to the Accumulation Value.
- - Additional premiums are applied pursuant to your current investment
allocation instructions, unless you give us different instructions by
Written Notice or authorized telephone transaction at the time you make
an additional premium payment.
- - We reserve the right to limit premiums or refund any values so the
Policy qualifies as life insurance under the Internal Revenue Code.
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o ACCUMULATION VALUE
As explained in the EXPENSES section below, once
each month, on the date of a Monthly Deduction
Amount, certain charges are deducted from your
Accumulation Value. These charges are called the
"Monthly Deduction."
On your Policy's date of issue the Accumulation Value equals the initial net
premium less the Monthly Deduction for the first month. The net premium is the
premium less the premium charge for taxes (3.75%) and premium processing
expenses ($2.00). On the date of each Monthly Deduction after the date of issue,
the Accumulation Value equals:
(a) the total of the values in each Subaccount; plus
(b) the accumulation value of the fixed account; plus
(c) the accumulation value of any Loan Account; less
(d) the Monthly Deduction for the current month.
The value for each Subaccount equals:
(a) the current number of accumulation units for that Subaccount;
multiplied by
(b) the current unit value.
Each net premium allocated to a Subaccount is converted into accumulation
units. This is done by dividing the net premium by the accumulation unit value
for the applicable Subaccount for the Valuation Period during which the net
premium is allocated to the Subaccount. The initial accumulation unit value for
each Subaccount was set when the Subaccount was established. The accumulation
unit value may increase or decrease from one Valuation Date to the next.
The accumulation unit value for a Subaccount on any Valuation Date is
calculated as follows:
(a) the net asset value per share of the applicable investment
portfolio multiplied by the number of shares held in the
Subaccount, before the purchase or redemption of any shares on
that date; divided by
(b) the total number of accumulation units held in the Subaccount on
the Valuation Date, before the purchase or redemption of any
shares on that date.
The Accumulation Value of the fixed account on the date of each Monthly
Deduction, before deducting the Monthly Deduction, equals:
(a) the value as of the date of the last Monthly Deduction; plus
(b) any net premiums credited since the date of the last Monthly
Deduction; plus
(c) any transfers from the Subaccounts to the fixed account since
the date of the last Monthly Deduction ; plus
(d) any transfers from the Loan Account to the fixed account since
the date of the last Monthly Deduction ; less
(e) any transfers from the fixed account to the Subaccounts since
the date of the last Monthly Deduction ; less
(f) any transfers from the fixed account to the Loan Account since
the date of the last Monthly Deduction ; less
(g) any partial withdrawals and surrender charges taken from the
fixed account since the date of the last Monthly Deduction ;
plus
(h) interest credited to the fixed account.
The Cash Surrender Value is the Accumulation Value less any outstanding
Policy loans and unpaid loan interest and less any applicable surrender charge.
o LAPSE AND GRACE PERIOD
o LAPSE
BECAUSE THE POLICY'S ACCUMULATION VALUE CAN FLUCTUATE DEPENDING UPON THE
PERFORMANCE OF YOUR SELECTED VARIABLE INVESTMENT OPTIONS, YOUR POLICY CAN LAPSE,
EVEN IF YOU PAY ALL PLANNED PREMIUMS ON TIME.
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No Policy Loan exists: The Policy will lapse if, on the date of a
Monthly Deduction, the Accumulation Value is not enough to cover the Monthly
Deduction (subject to the No-Lapse Period provision), and a grace period expires
without a sufficient premium payment.
A Policy Loan exists: The Policy will lapse on the date of a Monthly
Deduction when the Cash Surrender Value is not enough to cover the Monthly
Deduction and any loan interest due, and a grace period expires without a
sufficient premium payment.
A lapse of the Policy may result in adverse tax consequences.
o NO-LAPSE GUARANTY
The Policy will not lapse during a No-Lapse Period, even if the Cash
Surrender Value is insufficient to pay the Monthly Deduction, if you meet the
minimum monthly premium requirements and the following rules:
- - The Policy has never been reinstated;
- - There is no additional insured term insurance rider covering the insured
attached to the Policy;
- - There is both a minimum No-Lapse Period and a lifetime No-Lapse Period,
and they have different minimum monthly premium requirements that must
be met in order for the No-Lapse Period guaranty to apply. The
respective (minimum or lifetime) monthly premium requirement is met on
the date of any Monthly Deduction when the total premiums paid since the
Policy's date of issue, less any partial withdrawals, accumulated at 4%
interest, less any outstanding Policy loan, equals or exceeds the
required monthly premium, accumulated at 4% interest. (The minimum and
lifetime monthly premium requirements and No-Lapse Periods are shown on
the Policy's data pages.)
- - The No-Lapse guaranty will vary from state to state and the lifetime
No-Lapse guaranty is not available in all states).
o GRACE PERIOD
Although the Policy can lapse, we allow you a 61-day grace period to make a
premium payment sufficient to cover the Monthly Deduction and any loan interest
due.
- - We will mail notice to you of the insufficiency within 30 days of the
start of the grace period.
- - If the necessary additional premium payment is not received, the Policy
terminates as of the first day of the grace period.
- - Payment received during a grace period is first applied to repay Policy
loans and interest on those loans before the remaining amount is applied
as additional premium to keep the Policy in force.
- - Insurance coverage continues during the grace period, but the Policy is
deemed to have no Accumulation Value for purposes of Policy loans,
surrender and withdrawals.
- - If the insured dies during the grace period, the death benefit proceeds
payable equal the amount of death benefit in effect immediately prior to
the date the grace period began less any due and unpaid Monthly
Deduction and unpaid loan interest.
o PAID-UP LIFE INSURANCE (WHERE A POLICY LOAN EXISTS)
You can use this rider provision, under certain circumstances, to keep the
Policy from lapsing when you have a large Policy loan (or loans) outstanding.
This rider may not be available in all states. If you are age 75 or older and
have had your Policy for 15 years, you can exercise the right to have a Policy
rider issued that provides that your Policy will never lapse and will provide
paid-up life insurance, even if the Policy would otherwise soon lapse. We will
deduct 3% of the Accumulation Value on the date you exercise this rider.
Additional requirements on the date you exercise this rider are:
- - The Policy loan balance cannot exceed 96% of the Accumulation Value. Any
loan exceeding this amount must be repaid.
- - The Policy loan balance must exceed the specified amount of insurance
coverage.
- - Policy loans taken in the last 36 months must be less than 30% of the
entire amount of Policy loans outstanding.
- - Any additional insured term riders attached to your Policy must be
removed.
- - After the rider is in effect, we will not accept any additional premium,
nor will we allow any changes in the specified amount of insurance
coverage or death benefit option. In Maryland, the Monthly Deductions
will be zero after exercise of this rider.
- - All amounts not allocated to the Loan Account must be allocated to the
fixed account.
The amount of paid-up life insurance provided by this provision equals the
Accumulation Value on the date you elect this guarantee, less the 3% deduction,
with the resulting difference multiplied by 105%. On that date this amount will
become the specified amount of insurance coverage under the Policy. The death
benefit under the Policy will be the greatest of:
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(a) the current specified amount of insurance coverage on the date of death;
or
(b) the Policy's Accumulation Value on the date of death, plus the corridor
amount described in the Policy for the Insured's attained age; or
(c) the Policy's loan balance on the date of death, plus the corridor amount
for the Insured's attained age.
The death benefit payable will be reduced by any loan balance. The corridor
percentage will not be less than 1%.
We believe this provision, when exercised, will prevent the Policy from
lapsing. The Internal Revenue Service's position on this point is unclear, and
we do not warrant any tax effect. You should consult your tax advisor before
exercising this rider provision.
o MISSTATEMENT OF AGE OR SEX
If the insured's age or sex is misstated, all Policy payments and benefits
will be those that the premiums paid would have purchased at the correct age and
sex.
o SUICIDE
We will not pay the death benefit if the insured's death results from
suicide, while sane or insane, within two years (one year in Colorado and North
Dakota) from the date of issue (and, in Missouri, the insured intended suicide
at the time coverage was applied for). Instead, we will pay the sum of the
premiums paid since issue less any loans and unpaid loan interest and less any
partial withdrawals.
We will not pay that portion of the death benefit resulting from an increase in
the specified amount of coverage if the insured's death results from suicide,
while sane or insane, within two years (one year in Colorado and North Dakota)
from the effective date of the increase (and in Missouri, the insured intended
suicide at the time coverage was applied for). Instead, we will pay the sum of
the premiums paid for the increase.
o INCONTESTABILITY
We will not contest the validity of the Policy after it has been in force
during the lifetime of the insured for two years from the date of issue or for
two years from the date of reinstatement.
We will not contest the validity of an increase in the specified amount of
coverage after the Policy has been in force during the lifetime of the insured
for two years from the effective date of the increase. Any contest of an
increase in the specified amount of coverage will be based on the application
for that increase.
<TABLE>
<CAPTION>
o TELEPHONE TRANSACTIONS
<S> <C>
TELEPHONE TRANSACTIONS PERMITTED: TELEPHONE TRANSACTION RULES:
o Transfers. o Only you may elect. Do so on the Policy
o Partial withdrawals or loans of application or by prior Written Notice authorization
$10,000 or less by you (may be to us.
restricted in community property o Must be received by close of the New York Stock
states). Exchange ("NYSE") (usually 3 p.m. Central Time); if
o Change of premium allocations. later, the transaction will be processed the next day
the NYSE is open.
o Will be recorded for your protection.
o For security, you must provide your Social
Security number and/or other
identification information.
o May be discontinued at any time as to some or all
Owners.
</TABLE>
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We are not liable for following authorized telephone transaction
instructions we reasonably believe to be genuine.
o REINSTATEMENT
If the Policy lapses because a grace period ended without a sufficient
payment being made, you may reinstate it within five years of the date of lapse
and prior to the maturity date. To reinstate, we must receive:
- - written application signed by you and the insured;
- - evidence of the insured's insurability satisfactory to us;
- - enough payment to continue this Policy in force for three months; and
- - repayment or reinstatement of any outstanding Policy loan, together with
unpaid loan interest from the date of lapse.
On a reinstated Policy, there will be a re-establishment of surrender
charges, if any, measured from the original date of issue.
The effective date of reinstatement will be the date we approve the
application for reinstatement.
The specified amount of insurance coverage of the reinstated Policy may not
exceed the specified amount of insurance coverage at the time of lapse. The
Accumulation Value on the effective date of reinstatement will equal the amount
of reinstatement premium plus any applicable surrender charge measured from the
original date of issue to the date of reinstatement, and less the Monthly
Deduction for the current Policy Month.
o MATURITY DATE
The Policy's maturity date is the Policy Anniversary next following the
insured's 100th birthday. On the maturity date, we will pay you the Policy's
Accumulation Value, less any loan and unpaid loan interest, if (a) the insured
is then living; (b) this Policy is in force; and (c) coverage beyond maturity is
not elected. The Policy may terminate prior to the maturity date as described
above under the Lapse and Grace Period provision. If the Policy does continue in
force to the maturity date, it is possible there will be little or no Cash
Surrender Value at that time.
o COVERAGE BEYOND MATURITY
The tax consequences of continuing a Policy
beyond the insured's age 100 are unclear. Please
consult a tax advisor.
At least 30 days before the maturity date of the Policy, you may elect to
continue the Policy in force beyond the maturity date. The election must be made
by Written Notice. The following will apply:
- - We will maintain your allocation of Accumulation Value to the
Subaccounts and the fixed account according to your instructions.
- - The cost of insurance charge will be zero.
- - The risk charge will be zero.
- - The administrative charge will be zero.
- - The corridor percentage will be fixed at 101%.
- - The death benefit option will be the option described in the Policy as
Option 1.
- - Any riders (except the paid-up life insurance rider) attached to the
Policy that are then in force will terminate.
- - The insured's date of death will be considered the Policy's maturity
date.
- - You cannot pay any more premiums.
- - All other rights and benefits as described in the Policy will be
available during the insured's lifetime.
- - The Policy's death benefit, net of loan interest and any outstanding
loan balance, will be extended past the original maturity date, even if
the Policy has no Cash Surrender Value.
- - Any loan outstanding when the Policy is continued past the maturity date
will continue to accrue interest expense.
The tax consequences associated with extending coverage beyond maturity are
unclear. A tax advisor should be consulted before making such an election.
o DELAY OF PAYMENTS
We will usually pay any amounts from the Variable Account requested as a
Policy loan, partial withdrawal or cash surrender within seven days after we
receive your Written Notice. We can postpone such payments or any transfers out
of a Subaccount if: (i) the NYSE is closed for other than customary weekend and
holiday closings; (ii) trading on the NYSE is restricted; (iii) an emergency
exists as determined by the SEC, as a result of which it is not reasonably
practical to dispose of securities, or not reasonably practical to determine the
value of the net assets of the Variable Account; or (iv) the SEC permits delay
for the protection of security holders. The applicable rules of the SEC will
govern as to whether the conditions in (iii) or (iv) exist.
We may defer payment of Policy loans, partial withdrawals or a cash
surrender from the fixed account for up to six months (30 days in West Virginia)
from the date we receive your Written Notice.
o MINOR OWNER OR BENEFICIARY
A minor may not own the Policy solely in the minor's name and cannot receive
payments directly as a Policy Beneficiary. Contrary to common belief, in most
states parental status does not automatically give parents the power to provide
an adequate release to us to make Beneficiary payments to the parent for the
minor's benefit. A minor can "own" a Policy through the trustee of a trust
established for the minor's benefit, or through the minor's named and court
appointed guardian who owns the Policy in his or her capacity as trustee or
guardian. Where a minor is a named Beneficiary, we are able to pay the minor's
Beneficiary share to a minor's trustee or guardian. Some states allow us to make
such payments up to a limited amount directly to parents. Parents seeking to
have a minor's interest made payable to them for the minor's benefit are
encouraged to check with their local court to determine the process to be
appointed as the minor's guardian; it is often a very simple process. If there
is no adult representative able to give us an adequate release for payment of
the minor's Beneficiary interest, we will retain the minor's interest on deposit
until the minor attains the age of majority.
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EXPENSES
The charges and fees described below compensate us for our expenses in
distributing the Policy, bearing mortality and expense risks under the Policy,
and administering the investment options and the Policy. Except where stated
otherwise, charges and fees shown are the maximum we will charge, and some
actual expenses may be less.
Each Series Fund also deducts expenses from each investment portfolio; those
expenses are described in each Series Fund prospectus.
o DEDUCTIONS FROM PREMIUM
o TAX CHARGE - 3.75% OF EACH PREMIUM PAYMENT.
Many states and municipalities impose a premium tax on us, ranging from
0.75% to 5.0%. We also incur a federal income tax liability under Internal
Revenue Code Section 848 (a deferred acquisition cost tax) upon Policy premium
collected. We deduct 3.75% of each Policy premium payment we receive to cover
these expenses. (In Oregon, this deduction does not include state and
municipality premium tax expenses.) Please note that the actual federal and
state taxes that we will pay on a particular Policy may be more or less than the
amount we collect.
o PREMIUM PROCESSING CHARGE - $2 PER PAYMENT
We deduct $2 from each Policy premium payment we receive to cover our
premium processing expenses.
o MONTHLY DEDUCTION
We deduct a Monthly Deduction from the Policy's Accumulation Value on each
monthly anniversary of the date of issue (the "Monthly Deduction Date"),
consisting of: (1) the COST OF INSURANCE CHARGE; (2) the COST OF RIDERS CHARGE;
(3) the RISK CHARGE; and (4) the ADMINISTRATIVE CHARGE.
Charges based on the Accumulation Value are calculated before the Monthly
Deduction is deducted, but reflecting charges deducted from Subaccount assets.
The Monthly Deduction is deducted pro rata from the Accumulation Value in the
Subaccounts, the fixed account and the systematic transfer account. There is no
Monthly Deduction after the Policy Anniversary next following the insured's
100th birthday if coverage beyond maturity is elected.
o COST OF INSURANCE CHARGE
The cost of insurance charge is for providing insurance protection under the
Policy. The amount of the current charge is based on the issue age, sex (except
in Montana), risk and rate class of the insured, the current specified amount of
insurance coverage, and the length of time the Policy has been in force. We may
use current cost of insurance charges less than those shown in the Policy, and
reserve the right to change them. Changes will be by class and based on changes
in future expectations of factors such as investment earnings, mortality,
persistency, and expenses. We expect a profit from this charge.
The guaranteed cost of insurance each month equals:
- - The net amount at risk for the month; multiplied by
- - The guaranteed cost of insurance charge per $1,000 of specified amount
of insurance coverage (which is set forth in the Policy); divided by
- - $1,000.
The net amount at risk in any month equals:
- - The death benefit; less
- - The Accumulation Value after deducting the rider charge, if any, the
risk charge and the administrative charge for the current month.
RISK CHARGE - YEARS 1-10: 0.70% OF ACCUMULATION VALUE (ON AN ANNUAL BASIS);
YEARS 11+: 0.25% (WHICH WE MAY INCREASE TO A MAXIMUM CHARGE OF 0.55%)
The risk charge is for the mortality risks we assume -- that insureds
may live for shorter periods of time than we estimate, or the Accumulation Value
is not enough to keep the Policy in force during the No-Lapse Period. In Policy
Years 1 through 10, this risk charge is equivalent to an annual charge of 0.70%
of the Accumulation Value. In Policy Years 11 and later, this risk charge is
equivalent to an annual charge of 0.25% of the Accumulation Value. The risk
charge after Policy Year 10 will never exceed a maximum charge of 0.55% of the
Accumulation Value. The charge is deducted as 0.05833% of the Accumulation
Value, deducted on the date the Monthly Deduction is assessed, for the first 10
Policy Years, and 0.02083% (which we may increase to a maximum charge of
0.04583%) of the Accumulation Value, deducted on the date the Monthly Deduction
is assessed, for Policy Years 11 and thereafter. If this charge exceeds our
actual costs to cover death benefits and expenses, the excess goes to our
general account. Conversely, if this charge is not enough, we bear the
additional expense, not you. We expect a profit from this charge.
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<PAGE>
o ADMINISTRATIVE CHARGE - $7
The administrative charge partially compensates us for our costs in issuing
and administering the Policy and operating the Variable Account.
o COST OF RIDERS (riders may not be available in all states)
ADDITIONAL INSURED RIDER. This rider provides term insurance, for the
primary insured at a cost equal to the amount of insurance coverage provided by
the rider (not to exceed two times the base Policy's specified amount of
insurance coverage), multiplied by the rider's cost of insurance charge for each
$1,000 of benefit amount, divided by 1,000. This charge is based on the primary
insured's issue age, sex (except in Montana), and risk and rate class. The
charge for this rider increases on an annual basis.
ACCIDENTAL DEATH BENEFIT RIDER. This rider provides additional coverage in
the event of an accidental death, at a cost which is a fixed rate determined by
the insured's attained age and sex (just age in Montana) per each $1,000 of
rider coverage elected, multiplied by the rider benefit amount, divided by
$1,000. The rider benefit amount cannot exceed one-half of the base Policy's
specified amount of insurance coverage.
DISABILITY RIDER. This rider provides a benefit in the event of disability
of the Owner, at a cost which is a fixed rate determined by the insured's
attained age and sex (just age in Montana) per each $1.00 of rider monthly
deduction elected, multiplied by the amount of the monthly deduction.
PAID-UP LIFE INSURANCE RIDER. This rider guarantees to keep your Policy in
force as paid-up life insurance if there is a Policy loan and certain conditions
are met. Its cost is 3% of your Accumulation Value on the date you exercise the
rider benefit. (This rider is described in the IMPORTANT POLICY PROVISIONS
section, above.)
WAIVER OF SURRENDER CHARGE RIDER. No cost.
ACCELERATED DEATH BENEFIT RIDER. This rider provides a full payout of the
lesser of 94% of the Policy's death benefit (88% in Washington), or $500,000,
for the primary insured with evidence of a 12-month life expectancy or less (24
months in Washington). There is no premium or cost of insurance charge for this
rider, and it automatically attaches to all Policies with face amounts between
$50,000 and $500,000. If this rider option is exercised, all other riders and
the base Policy will terminate.
o TRANSFER CHARGE - $10 (FIRST 12 ARE FREE)
A transfer fee of $10 may be imposed for any transfer in excess of 12 per
Policy Year. The transfer fee is deducted from the amount transferred. Transfers
from the systematic transfer account are free and do not count toward the 12
free transfers. Transfers made pursuant to participation in the dollar cost
averaging, asset allocation, STEP or rebalancing programs are not subject to the
transfer charge rules. See the sections of this Prospectus describing those
programs for the rules of each program.
o SURRENDER CHARGE (ALSO APPLIES TO DECREASES IN SPECIFIED AMOUNT OF
INSURANCE COVERAGE)
Upon a total surrender or partial withdrawal from your Policy, we may deduct
a surrender charge from the amount of the surrender or partial withdrawal. If
the Policy's current specified amount of insurance coverage is decreased, we may
deduct a surrender charge from the Accumulation Value based on the amount of the
decrease. The surrender charge varies by issue age, sex (except in Montana),
risk and rate class, the length of time your Policy has been in force and the
specified amount of coverage. For example, for a male age 35 at issue, in the
nontobacco risk class and the preferred rate class, the surrender charge is
$13.00 for each $1,000.00 of specified amount in the first five years, declining
to $1.00 per $1,000.00 in the 12th year and zero thereafter. Generally, the
surrender charge is higher the older you are when the Policy is issued, subject
to state nonforfeiture requirements (which generally limits surrender charges at
higher ages). The highest aggregate surrender charge is $53 for each $1,000 of
specified amount of insurance coverage in the first year, declining to $10 per
$1,000 in the ninth year and zero thereafter. The length of the surrender charge
period varies depending upon the Policy Owner's issue age: the period is 12
years through age 52, 11 years at age 53, 10 years at age 54, and 9 years at age
55 and thereafter.
The surrender charge will not cover our cost of distributing the Policies.
Any deficiency is met from our general funds, including amounts derived from the
risk charge and the administrative charge (each described above).
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o SURRENDER CHARGE WAIVERS
We will waive the surrender charge upon partial withdrawals and surrenders
in the following situations. Each waiver may not be available in all states.
NURSING HOME WAIVER. Any partial withdrawal or surrender made pursuant to
your confinement, upon the recommendation of a licensed physician, to the
following facilities for 30 or more consecutive days: (a) a hospital licensed or
recognized as a general hospital by the state in which it is located; (b) a
hospital recognized as a general hospital by the Joint Commission on the
Accreditation of Hospitals; (c) a Medicare certified hospital; (d) a state
licensed nursing home with a registered nurse on duty 24 hours a day; and (e) a
Medicare certified long-term care facility. This waiver only applies to partial
withdrawals and surrenders requested no later than 91 days after the last day of
confinement to such facility. Proof of confinement must be provided. The nursing
home waiver is not available if any Owner is confined to a nursing home or
hospital facility on the date of issue (except in Pennsylvania). We will not
accept any additional premiums under your Policy once you elect this waiver.
DISABILITY WAIVER. Any partial withdrawal or surrender while you are
physically disabled. We may require proof of such disability, including written
confirmation of approval of any claim for Social Security Disability Benefits.
Proof of continued disability may be required through the date of any partial
withdrawal or surrender. We reserve the right to have any Owner claiming such
disability examined by a licensed physician of our choice and at our expense. We
will not accept any additional premiums under your Policy once you elect this
waiver.
The disability waiver is not available if any Owner is receiving Social
Security Disability Benefits on the date of issue (except in Pennsylvania) or is
age 65 or older on the date of withdrawal.
TERMINAL ILLNESS WAIVER (LIMITED LIFE EXPECTANCY WAIVER IN PENNSYLVANIA).
Any partial withdrawal or surrender after you are diagnosed with a terminal
illness. A terminal illness is a medical condition that, with a reasonable
degree of medical certainty, will result in your death within 12 months or less.
We may require proof of such illness including written confirmation from a
licensed physician. We reserve the right to have you examined by a licensed
physician of our choice and at our expense. We will not accept any additional
premiums under your Policy once you elect this waiver.
The terminal illness waiver is not available if you are diagnosed with a
terminal illness prior to or on the date of issue (except in Pennsylvania).
UNEMPLOYMENT WAIVER. Any partial withdrawal or surrender in the event you
become unemployed. The unemployment waiver is available upon submission of a
determination letter from a state department of labor indicating you received
unemployment benefits for at least 60 consecutive days prior to the election of
such waiver. The unemployment waiver may be exercised only once and is not
available if you are receiving unemployment benefits on the date of issue of the
Policy (except in Pennsylvania).
TRANSPLANT WAIVER. Any partial withdrawal or surrender if you undergo
transplant surgery as an organ donor or recipient for the following body organs:
heart, liver, lung, kidney, pancreas; or as a recipient of a bone marrow
transplant. Within 91 days of surgery, you must submit a letter from a licensed
physician (who is not the Owner or Insured of this Policy) stating that you
underwent transplant surgery for any of these organs. We reserve the right to
have you examined by a physician of our choice and at our expense. This waiver
may be exercised only once per transplant surgery.
RESIDENCE DAMAGE WAIVER. Any partial withdrawal or surrender if your
primary residence suffers physical damage in the amount of $50,000 or more. To
claim this waiver, send us a certified copy of a licensed appraiser's report
stating the amount of the damage. This certified copy must be submitted with 91
days of the date of the appraiser's report. We reserve the right to obtain a
second opinion by having the affected residence inspected by a licensed
appraiser of our choice and at our expense, and to rely upon our appraiser's
opinion. This waiver may be exercised only once per occurrence.
DEATH OF SPOUSE OR MINOR DEPENDENT WAIVER. Partial withdrawals or
surrenders of the following percentage of Accumulation Value made within six
months of your spouse's or minor dependent(s)' death: death of spouse, 50%;
death of minor dependent(s), 25%. We must receive proof of death. This waiver
may be exercised once for a spouse and once for each minor dependent, subject to
no more than 50% of the Accumulation Value being withdrawn pursuant to this
waiver each year. Subsequent withdrawals, or withdrawals above the waiver limit,
are subject to the surrender charge.
o SERIES FUND CHARGES
Each Series Fund investment portfolio is responsible for its own expenses.
The net assets of each portfolio reflects deductions for investment advisory
fees and other expenses. These charges are disclosed in each Series Fund's
prospectus which accompany this Prospectus. A table of portfolio annual expenses
is included in the INTRODUCTION AND SUMMARY section of this Prospectus.
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POLICY DISTRIBUTIONS
The principle purpose of the Policy is to provide a death benefit upon the
insured's death, but before then you may also borrow against the Policy's Cash
Surrender Value, take a partial withdrawal, or surrender it for its Cash
Surrender Value. Tax penalties and surrender charges may apply to amounts taken
out of your Policy. The Cash Surrender Value is the Accumulation Value less any
applicable surrender charge and less any outstanding Policy loan and unpaid loan
interest.
<TABLE>
<CAPTION>
o POLICY LOANS
<S> <C>
Amount You Can Borrow Loan Interest Rate
- ------------------------------------------------------ --------------------------------------------------
Standard Policy Loan. After the first Policy Year Standard Policy Loan. Net annual loan interest
(at any time in Indiana), you may borrow up to 100% rate of 2%: we charge an interest rate in
of the Cash Surrender Value, less loan interest to advance with a 6% effective annual yield, but we
the end of the Policy Year, and less a Monthly also credit an interest rate with an effective
Deduction that is sufficient to continue the Policy annual yield of 4% to any amounts in the Loan
in force for at least one month. Account.
- ------------------------------------------------------ --------------------------------------------------
Preferred Policy Loan. Available beginning in the Preferred Policy Loan. Net annual loan interest
10th Policy Year. Any loan outstanding at the rate of 0%: we charge an interest rate in
beginning of the 10th Policy Year will become a advance with a 6% effective annual yield, but we
preferred Policy loan from that point forward. also credit an interest rate with an effective
annual yield of 6% to any amounts in the Loan
Account.
- ---------------------------------------------------------------------------------------------------------
We believe a preferred Policy loan will not affect tax treatment of the Policy, but tax law is unclear
on this point and we do not warrant its tax effect.
You may wish to consult your tax advisor before taking a preferred Policy loan.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
LOAN RULES
o The Policy must be assigned to us as sole security for the loan.
o We will transfer all loan amounts from the Subaccounts and the fixed
account to a Loan Account. The amounts will be transferred on a pro rata
basis.
o Loan interest is due on each Policy Anniversary. If the interest is not
paid when due, we will transfer an amount equal to the unpaid loan
interest from the Subaccounts and the fixed account to the Loan Account
on a pro rata basis.
o All or part of a loan may be repaid at any time while the Policy is in
force. We will deduct the amount of a loan repayment from the Loan
Account and allocate that amount among the Subaccounts and the fixed
account in the same percentages as the Accumulation Value is allocated
on the date of repayment. We will treat any amounts you pay us as a
premium unless you specify that it is a loan repayment.
o The death benefit will be reduced by the amount of any loan outstanding
and unpaid loan interest on the date of the insured's death.
o We may defer making a loan for six months (30 days in West Virginia)
unless the loan is to pay premiums to us.
o SURRENDER
For amounts allocated to the fixed account and
the systematic transfer account, the Cash
Surrender Value is equal to or greater than the
minimum Cash Surrender Values required by the
state in which the Policy was delivered. The
value is based on the Commissioners 1980
Standard Mortality Table, the insured's age at
last birthday, with interest which yields 4% on
an annual basis
While the insured is alive, you may terminate the Policy for its Cash
Surrender Value. Following a surrender, all your rights in the Policy end.
SURRENDER RULES
o The Policy must be returned to us to receive the Cash Surrender Value.
o The maximum applicable Surrender Charge is described in your Policy and the
Expenses section of this Prospectus.
o Surrenders are taxable, and a 10% federal tax penalty may apply prior to
age 59 1/2.
o We may defer payment from the fixed account or the systematic transfer
account for up to six months (30 days in West Virginia).
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<PAGE>
PARTIAL WITHDRAWALS
After the first Policy Year, you may withdraw part of the Accumulation
Value. The amount requested and any surrender charge will be deducted from the
Accumulation Value on the date we receive your request (either by Written Notice
or, for amounts of $10,000 or less, by an authorized telephone transaction).
Amounts withdrawn may be subject to a surrender charge (as defined in the Policy
and the EXPENSES section of this Prospectus) unless one of the surrender charge
waiver provisions is applicable.
If DEATH BENEFIT OPTION 1 (described below) is in effect, then the current
specified amount of insurance coverage will be reduced by the amount of any
partial withdrawal and the Accumulation Value will be reduced by the amount of
the withdrawal and the surrender charge applicable to the decrease in the
current specified amount of insurance coverage. We will send you an amendment
showing the current specified amount of insurance coverage after the withdrawal.
If DEATH BENEFIT OPTION 2 (described below) is in effect, the Accumulation
Value will be reduced by the amount of the partial withdrawal (but the specified
amount will not change).
PARTIAL WITHDRAWAL RULES
o Partial withdrawals are made first from premiums paid and then from
earnings, beginning with the most recent premium payment.
o The minimum partial withdrawal amount is $250; the maximum is an amount such
that the remaining Cash Surrender Value is not less than $500 and the
specified amount of insurance coverage is at least $100,000 in Policy Years
1-5, and at least $50,000 thereafter.
o Partial withdrawals result in cancellation of Accumulation units from each
applicable Subaccount. Unless you instruct us otherwise, we will deduct
withdrawal amounts from the Subaccounts, the fixed account and the
systematic transfer account on a pro rata basis. No more than a pro rata
amount may be withdrawn from the fixed account and the systematic transfer
account.
o Withdrawals from the systematic transfer account will not affect the minimum
monthly transfer amount from that account, so they will cause the total
amount to be transferred to be completed in less time than originally
anticipated.
o We reserve the right to defer withdrawals from the fixed account and the
systematic transfer account for up to six months (30 days in West Virginia)
from the date we receive your request.
o Partial withdrawals may change the minimum and lifetime monthly premium
requirements applicable to the NO-LAPSE PERIOD provision.
o Partial withdrawals may be taxable and subject to a 10% federal tax penalty.
o DEATH BENEFIT
We will pay a death benefit after we receive necessary documentation of the
Insured's death, and we have sufficient information about the Beneficiary to
make the payment. Death benefits may be paid pursuant to a payment option
(including a lump-sum payment) selected by the Beneficiary to the extent allowed
by applicable law and any settlement agreement in effect at the insured's death.
(See the PAYMENT OF PROCEEDS section below.) If neither you nor the Beneficiary
makes a payment option election within 60 days of our receipt of documentation
of the insured's death, we will issue a lump-sum payment to the Beneficiary.
DEATH BENEFIT OPTIONS
You have a choice of one of two death benefit options. (Option 1 is in
effect unless you elect option 2.)
DEATH BENEFIT OPTION 1:
- ----------------------
The death benefit is the greater of:
(a) the specified amount of insurance coverage on the date of death; or (b) the
Policy's Accumulation Value on the date of death plus the corridor amount. The
death benefit amount can be level at the specified amount of insurance coverage.
DEATH BENEFIT OPTION 2:
The death benefit is the Policy's Accumulation Value on the date of death plus
the greater of:
(a) the specified amount of insurance coverage on the date of death; or
(b) the corridor amount.
The death benefit amount will always vary as the Accumulation Value goes up or
down each day.
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<PAGE>
The CORRIDOR AMOUNT equals the Accumulation Value on the insured's date of
death multiplied by the corridor percentage from the table shown below for the
insured's attained age.
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95-100 0%
53 64% 67 18% 100+ 1%
After the first Policy Year, you may change the death benefit option once each
year. Changes in the death benefit option may change the specified amount of
insurance coverage, because we will change the current specified amount to
maintain the level of death benefit in effect before the death benefit option
change. Any resulting decrease in specified amount is subject to a surrender
charge.
RULES FOR CHANGING THE DEATH BENEFIT OPTION
o A change in death benefit option takes effect on the date the Monthly
Deduction is assessed after we receive your Written Notice to change.
o After each change in death benefit option, we will send you an amendment to
the Policy showing the option in effect and the current specified amount of
coverage.
o A change in the current specified amount of coverage resulting from a death
benefit option change will change the minimum monthly and lifetime monthly
premium requirements applicable to the NO-LAPSE PERIOD provision.
CHANGE IN SPECIFIED AMOUNT OF INSURANCE COVERAGE
After the first Policy Year, you may change the current specified amount of
insurance coverage once each year. Any change will take effect on the date the
Monthly Deduction is assessed following the date we approve the change. We will
send you an amendment to the Policy showing the current specified amount of
coverage after the change.
RULES FOR CHANGING SPECIFIED AMOUNT
o An increase in the specified amount of coverage requires a new
application and evidence of insurability satisfactory to us.
o A decrease in the specified amount is subject to a surrender charge on
the amount of the decrease.
o A decrease is only allowed to the extent the specified amount of
coverage remains at least $100,000 during Policy Years 1-5; $50,000
thereafter.
o A change in the current specified amount of coverage will change the
minimum monthly and lifetime monthly premium requirements applicable to
the NO-LAPSE PERIOD provision.
o PAYMENT OF PROCEEDS
You may elect to have proceeds paid as annuity payments under any combination of
the fixed and variable payout options shown in the Policy. (In Maryland only
fixed payout options are available.) If another option is not chosen within 60
days of the date we receive satisfactory proof of death, we will make payment in
a lump sum.
RULES FOR PAYMENT OF PROCEEDS
o Payees must be individuals who receive payments in their own behalf
unless otherwise agreed to by us.
o Any option chosen will be effective when we acknowledge it.
o We may require proof of your age or survival or the age or survival
of the payee.
o We reserve the right to pay the proceeds in one sum when the amount is
less than $2,000, or when the option of payment chosen would result in
periodic payments of less than $20.
o When the last payee dies, we will pay to the estate of that payee any
amount on deposit, or the then present value of any remaining guaranteed
payments under a fixed option.
27
<PAGE>
FIXED PROCEEDS PAYMENTS: Fixed payments are available under all six payout
options described below. The proceeds will be transferred to our general
account, and the payments will be fixed in amount by the provisions selected and
the age and sex (if consideration of sex is allowed) of the payee. The interest
rate used in the payout options is guaranteed to yield 3% on an annual basis. We
may, at our sole discretion, declare additional interest to be paid or credited
annually for payout options 1, 2, 3, or 6. The guaranteed amounts are based on
the 1983a mortality table, and an interest rate that is guaranteed to yield 3%
annually. Current interest rates may be obtained from us.
VARIABLE PROCEEDS PAYMENTS: Only payout options 2, 4, and 6 are available
for variable payments. The dollar amount of the first monthly payment will be
determined by applying the proceeds allocated to variable Subaccounts to the
variable payout options table shown in the Policy applicable to the payout
option chosen. The tables are determined from the 1983a Mortality Table ALB . If
more than one Subaccount has been selected, the Accumulation Value of each
Subaccount is applied separately to the applicable table to determine the amount
of the first payment attributable to that particular Subaccount.
All variable payments other than the first will vary in amount according to
the investment performance of the applicable Subaccounts. The amount of each
subsequent payment equals the number of variable payment units for each
Subaccount, multiplied by the value of a variable payment unit for that
Subaccount 10 days prior to the date the variable payment is due. This amount
may increase or decrease from month to month. The number of units for each
Subaccount is determined by dividing the amount of the first payment
attributable to that Subaccount by the value of a unit in that Subaccount when
the first payment is determined.
If the net investment return of a Subaccount for a payment period is equal
to the pro-rated portion of the assumed investment rate, the variable payment
attributable to that Subaccount for that period will equal the payment for the
prior period. To the extent that such net investment return exceeds the assumed
investment rate for a payment period, the payment for that period will be
greater than the payment for the prior period and to the extent that such return
for a period falls short of the assumed investment rate, the payment for that
period will be less than the payment for the prior period. A charge equal on an
annual basis to 1.20% of the daily net asset value of the Variable Account is
deducted to compensate us for the administrative and other costs and risks
associated with the variable payment options.
o TRANSFERS BETWEEN FIXED AND VARIABLE PAYOUT OPTIONS
4 transfers are allowed each Policy Year that a
payout option is in effect.
The payee may exchange the value of a designated number of variable payment
units of a particular Subaccount into other variable payment units, the value of
which would be such that the dollar amount of a payment made on the date of the
exchange would be unaffected by the exchange.
Transfers may be made between Subaccounts and from a Subaccount to the fixed
account. No exchanges may be made from the fixed account to the variable
Subaccounts. Transfers will be made using the variable payment unit values for
the valuation period during which we receive any request.
o PAYOUT OPTIONS
The longer the guaranteed or projected proceeds
payment option period, the lower the amount of
each payment.
NOTE: UNLESS YOU ELECT A PAYOUT OPTION WITH A GUARANTEED PERIOD OR OPTION 1,
(DESCRIBED BELOW) IT IS POSSIBLE ONLY ONE PAYMENT WOULD BE MADE UNDER THE PAYOUT
OPTION IF THE PAYEE DIED BEFORE THE DUE DATE OF THE SECOND ANNUITY PAYMENT, ONLY
TWO ANNUITY PAYMENTS WOULD BE MADE IF THE PAYEE DIED BEFORE THE DUE DATE OF THE
THIRD ANNUITY PAYMENT, ETC. If the continuation of variable payments being made
under option 2 or 6 does not depend upon the payee's remaining alive; you may
surrender your Policy and receive the commuted value of any unpaid payments.
However, if your payment under Option 2 or 6 depends upon the payee's continued
life, you cannot surrender your Policy for cash. In this case, once option
payments commence, payments will end upon the payee's death.
28
<PAGE>
1) PROCEEDS HELD ON DEPOSIT AT INTEREST. While proceeds remain on deposit,
we annually credit interest to the proceeds. The interest may be paid to
the payee or added to the amount on deposit.
2) INCOME OF A SPECIFIED AMOUNT. Proceeds are paid in monthly installments
of a specified amount over at least a five-year period until proceeds,
with interest, have been fully paid.
3) INCOME FOR A SPECIFIED PERIOD. Periodic payments of proceeds are paid
for the number of years chosen. If no other frequency is selected,
payments will be made monthly. Monthly incomes for each $1,000 of
proceeds which include interest, are illustrated by a table in the
Policy.
4) LIFETIME INCOME. Proceeds are paid as monthly income for as long as the
payee lives. The amount of the monthly income annuity payment will be an
amount computed using either the Lifetime Monthly Income Table set forth
in the Policy (based on the 1983a mortality table) or, if more favorable
to the payee, our then current lifetime monthly income rates for payment
of proceeds. If a variable payout option is chosen, all variable
proceeds payments, other than the first variable payment, will vary in
amount according to the investment performance of the applicable
variable investment options.
GUARANTEES AVAILABLE FOR THE LIFETIME INCOME OPTION: Guaranteed Period
- An amount of monthly income is guaranteed for a specified number of
years and thereafter as long as the payee lives. Guaranteed Amount -
An amount of monthly income is guaranteed until the sum of payments
equals the proceeds placed under the option and as long after that as
the payee lives.
5) LUMP SUM. Proceeds are paid in one sum.
6) OTHER OPTIONS. We may be able to accommodate making proceeds payments
under other options, including joint and survivor periods. Contact us
for more information.
29
<PAGE>
- ----------------------------------------------------------
FEDERAL TAX MATTERS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a tax advisor. No attempt is made
to consider any applicable state tax or other tax laws, or to address any
federal estate, or state and local estate, inheritance and other tax
consequences of ownership or receipt of distributions under a Policy. This
discussion of federal income tax considerations relating to the Policy is based
upon our understanding of laws as they now exist and are currently interpreted
by the Internal Revenue Service ("IRS").
o LIFE INSURANCE QUALIFICATION
Tax laws affecting the Policy are complex. Tax
results may vary among individual uses of a
Policy. You are encouraged to seek independent
tax advice in purchasing or making elections
under the Policy.
The Internal Revenue Code of 1986, as amended (the "Code") defines a life
insurance contract for federal income tax purposes. This definition can be met
if an insurance contract satisfies either one of two tests set forth in that
section. The Code and related regulations do not directly address the manner in
which these tests should be applied to certain features of the Policy. Thus,
there is some uncertainty about the application of those tests to the Policy.
Nevertheless, we believe the Policy qualifies as a life insurance contract
for federal tax purposes, so that:
o the death benefit should be fully excludable from the
Beneficiary's gross income; and
o you should not be considered in constructive receipt of the Cash
Surrender Value, including any increases, unless and until it is
distributed from the Policy.
We reserve the right to make such changes in the Policy as we deem
necessary to assure it qualifies as a life insurance contract under the Code and
continues to provide the tax benefits of such qualification.
MODIFIED ENDOWMENT CONTRACTS. The Code establishes a class of life
insurance contracts designated as modified endowment contracts. The Code rules
governing whether a Policy will be treated as a modified endowment contract are
extremely complex. In general, a Policy is a modified endowment contract if the
accumulated premium payments made at any time during the first seven Policy
Years exceed the sum of the net level premium payments which would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of seven level annual premiums. A Policy may also become a
modified endowment contract because of a material change. The determination of
whether a Policy is a modified endowment contract after a material change
generally depends upon the relationship of the Policy's death benefit and
Accumulation Value at the time of such change and the additional premium
payments made in the seven years following the material change. A Policy may
also become a modified endowment contract if the death benefit is reduced.
This Policy's flexibility and how you tailor it
to meet your needs could cause it to be a
modified endowment contract. We recommend you
consult with a tax adviser to determine if
desired Policy transactions may cause such
treatment. When a premium payment is credited
which we believe causes the Policy to become a
modified endowment contract, we will notify you
and offer you the opportunity to request a
refund of that premium in order to avoid such
treatment. You have 30 days after receiving such
a notice to request the refund.
A Policy issued in exchange for a modified endowment contract is subject
to tax treatment as a modified endowment contract. However, we believe that a
Policy issued in exchange for a life insurance policy that is not a modified
endowment contract will generally not be treated as a modified endowment
contract if the death benefit of the Policy is greater than or equal to the
death benefit of the Policy being exchanged. The payment of any premiums at the
time of or after the exchange may, however, cause the Policy to become a
modified endowment contract. You may, of course, choose to not make additional
payments in order to prevent a Policy from being treated as a modified endowment
contract.
30
<PAGE>
o TAX TREATMENT OF LOANS AND OTHER DISTRIBUTIONS
Upon a surrender or lapse of the Policy or when benefits are paid at the
Policy's maturity date, if the amount received plus any loan amount exceeds the
total investment in the Policy, the excess will generally be treated as ordinary
income subject to tax, regardless of whether a Policy is or is not a modified
endowment contract. However, the tax consequences of distributions from, and
loans taken from or secured by, a Policy depend on whether the Policy is
classified as a modified endowment contract.
"INVESTMENT IN THE POLICY" means:
o the aggregate amount of any premium payments or other consideration
paid for the Policy, minus
o the aggregate amount received under the Policy which is excluded from
gross income of the Owner (except that the amount of any loan from,
or secured by, a Policy that is a modified endowment contract, to the
extent such amount is excluded from gross income, will be
disregarded), plus
o the amount of any loan from, or secured by, a Policy that is a
modified endowment contract to the extent that such amount is
included in the Owner's gross income.
DISTRIBUTIONS FROM POLICIES CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS are
subject to the following tax rules:
(1) All distributions, including surrenders and partial withdrawals, are
treated as ordinary income subject to tax up to the amount equal to the excess
(if any) of the Accumulation Value immediately before the distribution over the
investment in the Policy (see box below) at such time.
(2) Loans from or secured by the Policy are treated as distributions and
taxed accordingly.
(3) A 10% additional income tax is imposed on the portion of any
distribution from, or loan taken from or secured by, the Policy that is included
in income except where the distribution or loan is made on or after the Owner
attains age 59 1/2, is attributable to the Owner's becoming disabled, or is part
of a series of substantially equal periodic payments for the life (or life
expectancy) of the Owner or the joint lives (or joint life expectancies) of the
Owner and the Owner's beneficiary.
DISTRIBUTIONS FROM POLICIES NOT CLASSIFIED AS MODIFIED ENDOWMENT CONTRACTS are
generally treated as first recovering the investment in the Policy and then,
only after the return of all such investment in the Policy, as distributing
taxable income. An exception to this general rule occurs in the case of a
decrease in the Policy's death benefit or any other change that reduces benefits
under the Policy in the first nine years after the Policy is issued and that
results in a cash distribution to the Owner in order for the Policy to continue
complying with the Code's definition of life insurance. Such a cash distribution
will be taxed in whole or in part as ordinary income (to the extent of any gain
in the Policy) under rules prescribed in Section 7702 of the Code.
Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. However, it is possible that
preferred loans could be treated as distributions rather than loans.
Neither distributions (including distributions upon surrender) nor loans
from, or secured by, a Policy that is not a modified endowment contract are
subject to the 10% additional income tax rule. If a Policy which is not a
modified endowment contract becomes a modified endowment contract, then any
distributions made from the Policy within two years prior to the change in such
status will become taxable in accordance with the modified endowment contract
rules discussed above.
o OTHER POLICY OWNER TAX MATTERS
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's death benefit option, a Policy loan, a withdrawal, a surrender or
lapse, a change in Ownership, or an assignment of the Policy may have federal
income tax consequences. In addition, federal, state and local transfer, and
other tax consequences of Ownership or receipt of distributions from a Policy
depends on the circumstances of each Owner or Beneficiary.
INTEREST PAID ON POLICY LOANS generally is not tax deductible.
AGGREGATION OF MODIFIED ENDOWMENT CONTRACTS. Pre-death distributions
(including a loan, partial withdrawal, collateral assignment or full surrender)
from a Policy that is treated as a modified endowment contract may require a
special aggregation to determine the amount of income recognized on the Policy.
If we or any of our affiliates issue more than one modified endowment contract
to the same Policy Owner within a calendar year, then for purposes of measuring
the income on the Policy with respect to a distribution from any of those
Policies, the income for all those Policies will be aggregated and attributed to
that distribution.
FEDERAL AND STATE ESTATE, INHERITANCE AND OTHER TAX CONSEQUENCES of
ownership or receipt of proceeds under the Policy depend upon your or the
Beneficiary's individual circumstances.
THE POLICY MAY CONTINUE AFTER THE INSURED ATTAINS AGE 100. The tax
consequences associated with continuing a Policy beyond age 100 are unclear. A
tax advisor should be consulted on this issue.
31
<PAGE>
DIVERSIFICATION REQUIREMENTS. Code Section 817(h) requires investments of
the Variable Account to be "adequately diversified" in accordance with Treasury
Regulations for the Policy to qualify as a life insurance contract under the
Code. Any failure to comply with the diversification requirements could subject
you to immediate taxation on the incremental increases in Accumulation Value of
the Policy plus the cost of insurance protection for the year. However, we
believe the Policy, through the underlying investment portfolios, complies fully
with such requirements.
OWNER CONTROL. The Treasury Department stated that it anticipates the
issuance of regulations or rulings prescribing the circumstances in which your
control of the investments of the Variable Account may cause you, rather than
us, to be treated as the Owner of the assets in the Variable Account. To date,
no such regulations or guidance has been issued. If you are considered the Owner
of the assets of the Variable Account, income and gains from the Variable
Account would be included in your gross income.
The ownership rights under the Policy are similar to, but different in
certain respects from; those described by the IRS in rulings in which it
determined that the Owners were not Owners of separate account assets. For
example, you have additional flexibility in allocating Policy premium and
Accumulation Values. These differences could result in you being treated as the
Owner of a pro rata share of the assets of the Variable Account. In addition, we
do not know what standards will be set forth in the regulations or rulings which
the Treasury may issue. We therefore reserve the right to modify the Policy as
necessary to attempt to prevent you from being considered the Owner of the
assets of the Variable Account.
TAX-ADVANTAGED ARRANGEMENTS. The Policy may be used in various arrangements,
including non-qualified deferred compensation or salary continuance plans, split
dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare
benefit plans, retiree medical benefit plans and others. The tax consequences of
such plans may vary depending on the particular facts and circumstances of each
individual arrangement. Therefore, if you are contemplating the use of the
Policy in any arrangement the value of which depends in part on its tax
consequences, you should be sure to consult a qualified tax advisor regarding
the tax attributes of the particular arrangement and the suitability of this
product for the arrangement. Moreover, in recent years, Congress has adopted new
rules relating to corporate owned life insurance. Any business contemplating the
purchase of a new life insurance contract or a change in an existing contract
should consult a tax advisor.
POSSIBLE TAX LAW CHANGES. There is always a possibility that the tax
treatment of the Policy could change, by legislation or otherwise. You should
consult a tax advisor with respect to possible tax law changes and their effect
on your intended use of the Policy.
NO GUARANTEES REGARDING TAX TREATMENT. We cannot guaranty the tax treatment
of the Policy or any transaction involving the Policy. You should consult with a
tax adviser if you have tax questions about the Policy.
32
<PAGE>
- -----------------------------------------------------------
MISCELLANEOUS
o OUR MANAGEMENT
DIRECTORS*
Samuel L. Foggie, Sr. Retired Banking and Finance Industry Executive
Carol B. Hallett President and CEO, Air Transport Association of America
Jeffrey M. Heller President & COO, Electronic Data Systems
Thomas W. Osborne University of Nebraska Alumni Association
Richard J. Sampson Retired Insurance Executive of our Company
Oscar S. Straus II Chairman, The Daniel and Florence Guggenheim Foundation
John A. Sturgeon President and COO of our Company
Michael A. Wayne John Wayne Cancer Institute and John Wayne Foundation
Executive
John W. Weekly Chairman of the Board and CEO of our Company
SENIOR OFFICERS*
John W. Weekly Chairman and Chief Executive Officer
John A. Sturgeon President and Chief Operating Officer
G. Ronald Ames Executive Vice President
Cecil D. Bykerk Executive Vice President (Chief Actuary)
James L. Hanson Executive Vice President (Information Services)
Randall C. Horn Executive Vice President (Individual Insurance)
M. Jane Huerter Executive Vice President (Corporate Secretary)
William C. Mattox Executive Vice President (Federal Government Affairs)
Thomas J. McCusker Executive Vice President (General Counsel)
Daniel P. Neary Executive Vice President (Group Insurance)
Tommie D. Thompson Executive Vice President (Treasurer; Comptroller)
Richard A. Witt Executive Vice President (Chief Investment Officer)
*Business address for all directors and officers is Mutual of Omaha
Plaza, Omaha, Nebraska 68175.
o DISTRIBUTION OF THE POLICIES
Mutual of Omaha Investor Services, Inc. ("MOIS"), Mutual of Omaha Plaza,
Omaha, Nebraska 68175, is the principal underwriter of the Policy. Like us, MOIS
is an affiliate of Mutual of Omaha Insurance Company. MOIS is registered as a
broker-dealer with the SEC and is a member of the National Association of
Securities Dealers, Inc. MOIS contracts with one or more registered
broker-dealers ("Distributors") to distribute Policies. All persons selling the
Policy will be registered representatives of the Distributors, and will also be
licensed as insurance agents to sell variable life insurance. Commissions paid
to Distributors may be up to 115% of target premium for the first Policy Year
and up to 5% of target premium thereafter. Distributors may receive additional
compensation for amounts received in excess of target premium. We may also pay
other distribution expenses such as production incentive bonuses, including
non-cash awards. These distribution expenses do not result in any charges under
the Policies that are not described under the EXPENSES section of this
Prospectus.
o VOTING RIGHTS
As required by law, we will vote Series Fund shares held by the Variable
Account at regular and special shareholder meetings of the Series Funds pursuant
to instructions received from persons having voting interests in the Series
Funds. The Series Funds may not hold routine annual shareholder meetings.
As a Policy Owner, you may have a voting interest in the Series Fund
portfolios you are invested in. The number of votes that you may instruct for a
particular Subaccount is typically determined by your Accumulation Value in the
Subaccount. You will receive proxy material, reports, and other materials
relating to each Series Fund in which you have voting interests.
o DISTRIBUTION OF MATERIALS
We will distribute proxy statements, updated prospectuses and other
materials to you from time to time. In order to achieve cost savings, we may
send consolidated mailings to several owners with the same last name who share a
common address or post office box in accordance with the rules of the Securities
and Exchange Commission.
33
<PAGE>
o STATE REGULATION
We are subject to the insurance laws and regulations of all jurisdictions
where we are authorized to do business. The Policy has been approved by the
Department of Insurance of the State of Nebraska and insurance departments of
other jurisdictions.
We submit annual statements of our operations, including financial
statements, to the insurance departments of the various jurisdictions in which
we do business, for the purpose of determining solvency and compliance with
insurance laws and regulations.
o LEGAL PROCEEDINGS
As of the date of this Prospectus, there are no legal proceedings affecting
the Variable Account, or that are material in relation to our total assets.
o INDEPENDENT AUDITORS
Our Financial Statements as of December 31, 1999 and 1998, and for the
years ended December 31, 1997, 1998 and 1999, and the financial statements of
United of Omaha Separate Account B as of December 31, 1999, and for the years
ended December 31, 1999 and 1998 included in the Registration Statement which
incorporates this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, Omaha, Nebraska, as stated in their reports appearing
herein. The financial statements of United of Omaha Life Insurance Company
should be considered only as bearing on the ability of United of Omaha to meet
its obligations under the Policies. They should not be considered as bearing on
the investment performance of the assets held in United of Omaha Separate
Account B.
o REPORTS TO YOU
We will send you a statement at least annually showing your Policy's death
benefit, Accumulation Value and any outstanding Policy loan balance. We will
also confirm Policy loans, Subaccount transfers, lapses, surrenders and other
Policy transactions as they occur. You will receive such additional periodic
reports as may be required by the SEC.
DO YOU HAVE QUESTIONS?
If you have questions about your Policy or this
Prospectus, you may contact your agent or broker
who gave this Prospectus to you, or you may
contact us at: United of Omaha, Variable Product
Services, P.O. Box 8430, Omaha, Nebraska
68103-0430. Telephone 1-800-238-9354.
34
<PAGE>
- ----------------------------------------------
ILLUSTRATIONS
DEATH BENEFITS, CASH SURRENDER VALUE AND ACCUMULATED PREMIUMS
The tables in this section illustrate how the Policy operates: how the death
benefit, Cash Surrender Value, and Accumulation Value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for the
Variable Account equal to constant after-tax annual rates of 0%, 6%, and 12%.
The tables are based on specified amount of life insurance coverage of $250,000
for a male age 45 and 55 and for a female age 45, each in a preferred nontobacco
rate class, and for a male age 45 in a non-preferred nontobacco rate class. The
tables reflect the 0.70% risk charge for Policy Years 1-10 (0.25% in years 11+)
deducted from Variable Account assets, the monthly $7 administrative charge, the
$2 premium processing charge, the deduction of 3.75% of premium payments for
state (where permitted) and federal taxes and the current cost of insurance
charge. The tables also include Accumulation Values, Cash Surrender Values and
death benefit amounts that reflect a 0.70% risk charge for Policy Years 1-10
(0.55% in Policy Years 11+), the maximum risk charge the company is
contractually entitled to assess under the Policy as well as a cost of insurance
charge based upon the guaranteed cost of insurance charge. These tables may
assist in comparison of death benefits, Cash Surrender Values and Accumulation
Values with those under other variable life insurance policies that may be
issued by us or other companies. These tables assume no riders are attached to
the base policy illustrated.
Death benefits, Cash Surrender Values, and Accumulation Values for a Policy
would be different from the amounts shown if the actual gross rates of return
differed from the 0%, 6% or 12% rates illustrated, if the initial premium was
paid in another amount, if additional payments were made, or if any Policy loan
or partial withdrawal was made during the period of time illustrated. They would
also be different depending on the allocation of Accumulation Value among the
Variable Account's Subaccounts, or if the actual gross rates of return averaged
0%, 6% or 12%, but varied above and below that average for the period.
The amounts for the death benefit, Cash Surrender Value, and Accumulation
Value shown in the tables reflect the fact that the maximum risk charge,
administrative charge, and a charge for the cost of insurance are deducted from
the Accumulation Value on each Monthly Deduction date. The Cash Surrender Values
shown in the tables reflect the fact that a Surrender Charge is deducted from
the Accumulation Value upon surrender or lapse during the first 9-12 Policy
Years, depending on issue age. The amounts shown in the tables also take into
account an average daily charge equal to an annual charge 0.85% of the average
daily net assets of the Series Funds for the investment advisory fees and
operating expenses incurred by the Series Funds. The gross annual investment
return rates of 0%, 6%, and 12% on the Fund's assets are equal to net annual
investment return rates of -0.85%, 5.15%, 11.15%, respectively.
The hypothetical rates of return shown in the tables do not reflect any tax
charges attributable to the Variable Account, since no such charges are
currently made. If any such charges are imposed in the future, the gross annual
rate of return would have to exceed the rates shown by an amount sufficient to
cover the tax charges, in order to produce the death benefits, Cash Surrender
Values and Accumulation Values illustrated.
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium required to keep the Policy in force were
invested to earn interest, after taxes, of 5% per year, compounded annually.
Upon request, we will provide a comparable illustration based upon the
proposed insured's actual age, sex and underwriting classification, the
specified amount of insurance coverage, the proposed amount and frequency of
premium payments and any available riders requested.
35
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85NET)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,283 0 250,000 2,024 0 250,000
2 6,716 4,488 0 250,000 3,956 0 250,000
3 10,328 6,615 615 250,000 5,793 0 250,000
4 14,120 8,660 2,660 250,000 7,529 1,529 250,000
5 18,102 10,621 4,621 250,000 9,160 3,160 250,000
6 22,283 12,499 7,249 250,000 10,676 5,426 250,000
7 26,673 14,279 9,779 250,000 12,065 7,565 250,000
8 31,283 15,952 12,202 250,000 13,314 9,564 250,000
9 36,123 17,508 14,508 250,000 14,407 11,407 250,000
10 41,205 18,939 16,689 250,000 15,330 13,080 250,000
11 46,541 20,808 19,308 250,000 16,093 14,593 250,000
12 52,145 22,582 21,832 250,000 16,657 15,907 250,000
13 58,028 24,277 24,277 250,000 17,012 17,012 250,000
14 64,205 25,867 25,867 250,000 17,138 17,138 250,000
15 70,691 27,343 27,343 250,000 17,008 17,008 250,000
16 77,502 28,696 28,696 250,000 16,590 16,590 250,000
17 84,653 29,913 29,913 250,000 15,854 15,854 250,000
18 92,162 30,947 30,947 250,000 14,746 14,746 250,000
19 100,046 31,808 31,808 250,000 13,214 13,214 250,000
20 108,324 32,480 32,480 250,000 11,203 11,203 250,000
25 156,354 32,916 32,916 250,000 0 0 250,000
35 295,889 8,134 8,134 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
36
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,440 0 250,000 2,173 0 250,000
2 6,716 4,945 0 250,000 4,380 0 250,000
3 10,328 7,516 1,516 250,000 6,618 618 250,000
4 14,120 10,151 4,151 250,000 8,883 2,883 250,000
5 18,102 12,850 6,850 250,000 11,170 5,170 250,000
6 22,283 15,619 10,369 250,000 13,470 8,220 250,000
7 26,673 18,442 13,942 250,000 15,770 11,270 250,000
8 31,283 21,315 17,565 250,000 18,058 14,308 250,000
9 36,123 24,228 21,228 250,000 20,315 17,315 250,000
10 41,205 27,176 24,926 250,000 22,527 20,277 250,000
11 46,541 30,766 29,266 250,000 24,715 23,215 250,000
12 52,145 34,463 33,713 250,000 26,829 26,079 250,000
13 58,028 38,293 38,293 250,000 28,858 28,858 250,000
14 64,205 42,236 42,236 250,000 30,778 30,778 250,000
15 70,691 46,293 46,293 250,000 32,560 32,560 250,000
16 77,502 50,462 50,462 250,000 34,171 34,171 250,000
17 84,653 54,742 54,742 250,000 35,575 35,575 250,000
18 92,162 59,097 59,097 250,000 36,716 36,716 250,000
19 100,046 63,547 63,547 250,000 37,535 37,535 250,000
20 108,324 68,089 68,089 250,000 37,973 37,973 250,000
25 156,354 92,549 92,549 250,000 31,857 31,857 250,000
35 295,889 152,268 152,268 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
37
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Male issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,597 0 250,000 2,323 0 250,000
2 6,716 5,421 0 250,000 4,823 0 250,000
3 10,328 8,493 2,493 250,000 7,516 1,516 250,000
4 14,120 11,834 5,834 250,000 10,416 4,416 250,000
5 18,102 15,472 9,472 250,000 13,542 7,542 250,000
6 22,283 19,439 14,189 250,000 16,906 11,656 250,000
7 26,673 23,756 19,256 250,000 20,524 16,024 250,000
8 31,283 28,452 24,702 250,000 24,411 20,661 250,000
9 36,123 33,558 30,558 250,000 28,582 25,582 250,000
10 41,205 39,114 36,864 250,000 33,058 30,808 250,000
11 46,541 45,830 44,330 250,000 37,919 36,419 250,000
12 52,145 53,225 52,475 250,000 43,152 42,402 250,000
13 58,028 61,398 61,398 250,000 48,797 48,797 250,000
14 64,205 70,415 70,415 250,000 54,893 54,893 250,000
15 70,691 80,374 80,374 250,000 61,481 61,481 250,000
16 77,502 91,380 91,380 250,000 68,609 68,609 250,000
17 84,653 103,558 103,558 250,000 76,335 76,335 250,000
18 92,162 117,023 117,023 250,000 84,717 84,717 250,000
19 100,046 131,955 131,955 250,000 93,828 93,828 250,000
20 108,324 148,539 148,539 250,000 103,763 103,763 250,000
25 156,354 264,594 264,594 306,929 171,105 171,105 250,000
35 295,889 784,039 784,039 823,241 491,600 491,600 516,180
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
38
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,692 0 250,000 2,855 0 250,000
2 11,236 7,226 0 250,000 5,486 0 250,000
3 17,279 10,620 370 250,000 7,887 0 250,000
4 23,624 13,847 3,597 250,000 10,038 0 250,000
5 30,286 16,897 6,647 250,000 11,919 1,669 250,000
6 37,281 19,758 11,758 250,000 13,502 5,502 250,000
7 44,626 22,417 16,417 250,000 14,761 8,761 250,000
8 52,339 24,825 20,825 250,000 15,649 11,649 250,000
9 60,437 26,985 24,985 250,000 16,122 14,122 250,000
10 68,939 28,880 28,880 250,000 16,134 16,134 250,000
11 77,867 31,327 31,327 250,000 15,666 15,666 250,000
12 87,242 33,593 33,593 250,000 14,643 14,643 250,000
13 97,085 35,730 35,730 250,000 13,014 13,014 250,000
14 107,420 37,684 37,684 250,000 10,710 10,710 250,000
15 118,272 39,442 39,442 250,000 7,637 7,637 250,000
16 129,667 40,988 40,988 250,000 3,663 3,663 250,000
17 141,631 42,224 42,224 250,000 0 0 250,000
18 154,194 43,105 43,105 250,000 0 0 250,000
19 167,384 43,583 43,583 250,000 0 0 250,000
20 181,234 43,616 43,616 250,000 0 0 250,000
25 261,592 37,385 37,385 250,000 0 0 250,000
35 495,046 0 0 0 0 0 0
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
39
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 3,951 0 250,000 3,088 0 250,000
2 11,236 7,975 0 250,000 6,129 0 250,000
3 17,279 12,091 1,841 250,000 9,114 0 250,000
4 23,624 16,277 6,027 250,000 12,020 1,770 250,000
5 30,286 20,526 10,276 250,000 14,821 4,571 250,000
6 37,281 24,828 16,828 250,000 17,485 9,485 250,000
7 44,626 29,174 23,174 250,000 19,980 13,980 250,000
8 52,339 33,518 29,518 250,000 22,252 18,252 250,000
9 60,437 37,868 35,868 250,000 24,247 22,247 250,000
10 68,939 42,209 42,209 250,000 25,908 25,908 250,000
11 77,867 47,412 47,412 250,000 27,224 27,224 250,000
12 87,242 52,756 52,756 250,000 28,092 28,092 250,000
13 97,085 58,300 58,300 250,000 28,445 28,445 250,000
14 107,420 64,012 64,012 250,000 28,198 28,198 250,000
15 118,272 69,902 69,902 250,000 27,233 27,233 250,000
16 129,667 75,972 75,972 250,000 25,395 25,395 250,000
17 141,631 82,163 82,163 250,000 22,484 22,484 250,000
18 154,194 88,463 88,463 250,000 18,234 18,234 250,000
19 167,384 94,865 94,865 250,000 12,336 12,336 250,000
20 181,234 101,371 101,371 250,000 4,433 4,433 250,000
25 261,592 137,369 137,369 250,000 0 0 250,000
35 495,046 244,596 244,596 250,000 0 0 0
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
40
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Male issue age 55 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $5,220
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 5,481 4,211 0 250,000 3,322 0 250,000
2 11,236 8,756 0 250,000 6,802 0 250,000
3 17,279 13,689 3,439 250,000 10,453 203 250,000
4 23,624 19,026 8,776 250,000 14,277 4,027 250,000
5 30,286 24,800 14,550 250,000 18,271 8,021 250,000
6 37,281 31,052 23,052 250,000 22,434 14,434 250,000
7 44,626 37,826 31,826 250,000 26,763 20,763 250,000
8 52,339 45,137 41,137 250,000 31,243 27,243 250,000
9 60,437 53,063 51,063 250,000 35,859 33,859 250,000
10 68,939 61,667 61,667 250,000 40,600 40,600 250,000
11 77,867 71,971 71,971 250,000 45,535 45,535 250,000
12 87,242 83,360 83,360 250,000 50,609 50,609 250,000
13 97,085 96,019 96,019 250,000 55,829 55,829 250,000
14 107,420 110,079 110,079 250,000 61,200 61,200 250,000
15 118,272 125,726 125,726 250,000 66,715 66,715 250,000
16 129,667 143,176 143,176 250,000 72,354 72,354 250,000
17 141,631 162,642 162,642 250,000 78,087 78,087 250,000
18 154,194 184,424 184,424 250,000 83,867 83,867 250,000
19 167,384 208,886 208,886 250,000 89,653 89,653 250,000
20 181,234 236,476 236,476 253,029 95,427 95,427 250,000
25 261,592 427,338 427,338 448,705 124,818 124,818 250,000
35 495,046 1,255,952 1,255,952 1,318,750 219,161 219,161 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
41
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,750 0 250,000 1,523 0 250,000
2 5,381 3,440 0 250,000 2,977 0 250,000
3 8,275 5,069 69 250,000 4,356 0 250,000
4 11,314 6,636 1,636 250,000 5,661 661 250,000
5 14,505 8,137 3,137 250,000 6,885 1,885 250,000
6 17,855 9,576 5,326 250,000 8,024 3,774 250,000
7 21,373 10,941 7,191 250,000 9,071 5,321 250,000
8 25,066 12,224 9,224 250,000 10,016 7,016 250,000
9 28,945 13,424 10,924 250,000 10,852 8,352 250,000
10 33,017 14,533 12,783 250,000 11,578 9,828 250,000
11 37,293 16,025 14,775 250,000 12,209 10,959 250,000
12 41,782 17,450 16,950 250,000 12,726 12,226 250,000
13 46,497 18,809 18,809 250,000 13,134 13,134 250,000
14 51,446 20,098 20,098 250,000 13,434 13,434 250,000
15 56,644 21,312 21,312 250,000 13,612 13,612 250,000
16 62,101 22,445 22,445 250,000 13,648 13,648 250,000
17 67,831 23,478 23,478 250,000 13,511 13,511 250,000
18 73,848 24,398 24,398 250,000 13,159 13,159 250,000
19 80,165 25,193 25,193 250,000 12,542 12,542 250,000
20 86,798 25,853 25,853 250,000 11,626 11,626 250,000
25 125,284 27,190 27,190 250,000 1,853 1,853 250,000
35 237,091 12,433 12,433 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
42
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,874 0 250,000 1,640 0 250,000
2 5,381 3,796 0 250,000 3,304 0 250,000
3 8,275 5,768 768 250,000 4,989 0 250,000
4 11,314 7,790 2,790 250,000 6,696 1,696 250,000
5 14,505 9,860 4,860 250,000 8,418 3,418 250,000
6 17,855 11,984 7,734 250,000 10,149 5,899 250,000
7 21,373 14,150 10,400 250,000 11,884 8,134 250,000
8 25,066 16,354 13,354 250,000 13,613 10,613 250,000
9 28,945 18,594 16,094 250,000 15,325 12,825 250,000
10 33,017 20,865 19,115 250,000 17,021 15,271 250,000
11 37,293 23,676 22,426 250,000 18,722 17,472 250,000
12 41,782 26,579 26,079 250,000 20,404 19,904 250,000
13 46,497 29,579 29,579 250,000 22,070 22,070 250,000
14 51,446 32,677 32,677 250,000 23,720 23,720 250,000
15 56,644 35,874 35,874 250,000 25,341 25,341 250,000
16 62,101 39,171 39,171 250,000 26,913 26,913 250,000
17 67,831 42,556 42,556 250,000 28,403 28,403 250,000
18 73,848 46,023 46,023 250,000 29,768 29,768 250,000
19 80,165 49,566 49,566 250,000 30,956 30,956 250,000
20 86,798 53,184 53,184 250,000 31,928 31,928 250,000
25 125,284 72,726 72,726 250,000 32,547 32,547 250,000
35 237,091 118,322 118,322 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
43
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Female issue age 45 Preferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $2,500
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,997 0 250,000 1,756 0 250,000
2 5,381 4,168 0 250,000 3,646 0 250,000
3 8,275 6,527 1,527 250,000 5,679 679 250,000
4 11,314 9,094 4,094 250,000 7,869 2,869 250,000
5 14,505 11,887 6,887 250,000 10,228 5,228 250,000
6 17,855 14,935 10,685 250,000 12,766 8,516 250,000
7 21,373 18,249 14,499 250,000 15,498 11,748 250,000
8 25,066 21,854 18,854 250,000 18,434 15,434 250,000
9 28,945 25,777 23,277 250,000 21,590 19,090 250,000
10 33,017 30,046 28,296 250,000 24,989 23,239 250,000
11 37,293 35,255 34,005 250,000 28,700 27,450 250,000
12 41,782 40,995 40,495 250,000 32,721 32,221 250,000
13 46,497 47,326 47,326 250,000 37,095 37,095 250,000
14 51,446 54,312 54,312 250,000 41,865 41,865 250,000
15 56,644 62,027 62,027 250,000 47,068 47,068 250,000
16 62,101 70,553 70,553 250,000 52,740 52,740 250,000
17 67,831 79,968 79,968 250,000 58,913 58,913 250,000
18 73,848 90,371 90,371 250,000 65,621 65,621 250,000
19 80,165 101,876 101,876 250,000 72,897 72,897 250,000
20 86,798 114,615 114,615 250,000 80,803 80,803 250,000
25 125,284 203,155 203,155 250,000 133,279 133,279 250,000
35 237,091 606,342 606,342 636,659 377,657 377,657 396,540
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
44
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0% (-0.85% NET)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,205 0 250,000 2,024 0 250,000
2 6,716 4,328 0 250,000 3,956 0 250,000
3 10,328 6,367 367 250,000 5,793 0 250,000
4 14,120 8,319 2,319 250,000 7,529 1,529 250,000
5 18,102 10,180 4,180 250,000 9,160 3,160 250,000
6 22,283 11,942 6,692 250,000 10,676 5,426 250,000
7 26,673 13,596 9,096 250,000 12,065 7,565 250,000
8 31,283 15,132 11,382 250,000 13,314 9,564 250,000
9 36,123 16,541 13,541 250,000 14,407 11,407 250,000
10 41,205 17,806 15,556 250,000 15,330 13,080 250,000
11 46,541 19,402 17,902 250,000 16,093 14,593 250,000
12 52,145 20,882 20,132 250,000 16,657 15,907 250,000
13 58,028 22,244 22,244 250,000 17,012 17,012 250,000
14 64,205 23,477 23,477 250,000 17,138 17,138 250,000
15 70,691 24,570 24,570 250,000 17,008 17,008 250,000
16 77,502 25,511 25,511 250,000 16,590 16,590 250,000
17 84,653 26,257 26,257 250,000 15,854 15,854 250,000
18 92,162 26,780 26,780 250,000 14,746 14,746 250,000
19 100,046 27,050 27,050 250,000 13,214 13,214 250,000
20 108,324 27,039 27,039 250,000 11,203 11,203 250,000
25 156,354 22,993 22,993 250,000 0 0 250,000
35 295,889 0 0 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
45
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6% (5.15% NET)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,359 0 250,000 2,173 0 250,000
2 6,716 4,774 0 250,000 4,380 0 250,000
3 10,328 7,245 1,245 250,000 6,618 618 250,000
4 14,120 9,768 3,768 250,000 8,883 2,883 250,000
5 18,102 12,343 6,343 250,000 11,170 5,170 250,000
6 22,283 14,964 9,714 250,000 13,470 8,220 250,000
7 26,673 17,621 13,121 250,000 15,770 11,270 250,000
8 31,283 20,307 16,557 250,000 18,058 14,308 250,000
9 36,123 23,014 20,014 250,000 20,315 17,315 250,000
10 41,205 25,726 23,476 250,000 22,527 20,277 250,000
11 46,541 28,959 27,459 250,000 24,715 23,215 250,000
12 52,145 32,262 31,512 250,000 26,829 26,079 250,000
13 58,028 35,637 35,637 250,000 28,858 28,858 250,000
14 64,205 39,080 39,080 250,000 30,778 30,778 250,000
15 70,691 42,586 42,586 250,000 32,560 32,560 250,000
16 77,502 46,149 46,149 250,000 34,171 34,171 250,000
17 84,653 49,737 49,737 250,000 35,575 35,575 250,000
18 92,162 53,329 53,329 250,000 36,716 36,716 250,000
19 100,046 56,905 56,905 250,000 37,535 37,535 250,000
20 108,324 60,446 60,446 250,000 37,973 37,973 250,000
25 156,354 78,128 78,128 250,000 31,857 31,857 250,000
35 295,889 104,542 104,542 250,000 0 0 250,000
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
46
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12% (11.15% NET)
Male issue age 45 Nonpreferred Nontobacco Class
Initial Specified Amount $250,000
Annual Planned Premium $3,120
CURRENT CHARGES * GUARANTEED CHARGES **
----------------------------- --------------------------------
PREMIUMS
END OF ACCUMULATED ACCUMU- CASH ACCUMU- CASH
CONTRACT AT 5% INTEREST LATION SURRENDER DEATH LATION SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,276 2,514 0 250,000 2,323 0 250,000
2 6,716 5,240 0 250,000 4,823 0 250,000
3 10,328 8,198 2,198 250,000 7,516 1,516 250,000
4 14,120 11,406 5,406 250,000 10,416 4,416 250,000
5 18,102 14,889 8,889 250,000 13,542 7,542 250,000
6 22,283 18,669 13,419 250,000 16,906 11,656 250,000
7 26,673 22,766 18,266 250,000 20,524 16,024 250,000
8 31,283 27,206 23,456 250,000 24,411 20,661 250,000
9 36,123 32,020 29,020 250,000 28,582 25,582 250,000
10 41,205 37,236 34,986 250,000 33,058 30,808 250,000
11 46,541 43,468 41,968 250,000 37,919 36,419 250,000
12 52,145 50,311 49,561 250,000 43,152 42,402 250,000
13 58,028 57,838 57,838 250,000 48,797 48,797 250,000
14 64,205 66,124 66,124 250,000 54,893 54,893 250,000
15 70,691 75,255 75,255 250,000 61,481 61,481 250,000
16 77,502 85,330 85,330 250,000 68,609 68,609 250,000
17 84,653 96,440 96,440 250,000 76,335 76,335 250,000
18 92,162 108,707 108,707 250,000 84,717 84,717 250,000
19 100,046 122,274 122,274 250,000 93,828 93,828 250,000
20 108,324 137,313 137,313 250,000 103,763 103,763 250,000
25 156,354 243,335 243,335 282,269 171,105 171,105 250,000
35 295,889 721,067 721,067 757,120 491,600 491,600 516,180
</TABLE>
* These values reflect investment results using current cost of insurance rates
and expense charges.
** These values reflect investment results using guaranteed cost of insurance
rates and expense charges.
The hypothetical investment results shown above and elsewhere in this Prospectus
are illustrative only and should not be deemed a representation of past or
future investment results. Actual investment results may be more or less than
those shown and will depend on a number of different factors, including the
investment allocations by the Owner and different investment rates of return for
the portfolios. The death benefit, Accumulation Value and Cash Surrender Value
for a Policy would be different from those shown if the actual investment rates
of return averaged the rates shown above over a period of years, but fluctuated
above or below those averages from individual Policy Years. These values would
also be different if any Policy loan or partial withdrawal were made during the
period. No representation can be made that these assumed investment rates of
return can be achieved for any one year or sustained over any period of time.
47
<PAGE>
- -----------------------------------------------------------
FINANCIAL STATEMENTS
UNITED OF OMAHA
LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL
OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 1999, 1998 AND 1997
48
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
Omaha, Nebraska
We have audited the accompanying statutory basis statements of admitted assets,
liabilities, and surplus of United of Omaha Life Insurance Company (the
"Company") (a wholly-owned subsidiary of Mutual of Omaha Insurance Company) as
of December 31, 1999 and 1998, and the related statutory basis statements of
income, changes in surplus, and cash flows for each of the three years in the
period ended December 31, 1999. The financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note 1 to the financial statements, the Company has
prepared these financial statements in conformity with accounting practices
prescribed or permitted by the Insurance Department of the State of Nebraska,
which practices differ from generally accepted accounting principles. The
effects on such financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are described
in Note 13.
In our opinion, because of the effects of the matters discussed in the preceding
paragraph, the financial statements do not present fairly, in conformity with
generally accepted accounting principles, the financial position of United of
Omaha Life Insurance Company as of December 31, 1999 and 1998, or the results of
its operations or its cash flows for each of the three years in the period ended
December 31, 1999.
In our opinion, the statutory basis financial statements referred to above
present fairly, in all material respects, the admitted assets, liabilities, and
surplus of United of Omaha Life Insurance Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, on the basis of accounting
described in Note 1 to the financial statements.
49
<PAGE>
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule 1 - Selected Financial Data is
presented to comply with the National Association of Insurance Commissioners
Annual Statement Instructions and is not a required part of the basic financial
statements. This schedule is the responsibility of the Company's management.
This schedule has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 11, 2000
50
<PAGE>
<TABLE>
<CAPTION>
[UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS
DECEMBER 31, 1999 AND 1998
- -----------------------------------------------------------------------------------------------------
ADMITTED ASSETS 1999 1998
<S> <C> <C>
Cash and invested assets:
Bonds $ 7,686,772,659 $7,253,217,367
Preferred stocks 0 3,954,659
Common stocks - unaffiliated 9,984,000 13,838,123
Common stocks - affiliated 95,788,706 90,269,520
Mortgage loans 655,076,191 599,396,008
Real estate occupied by the Company, net of
accumulated depreciation of $62,841,429
in 1999 and $59,318,600 in 1998 76,636,056 79,261,655
Real estate acquired in satisfaction of debt, net of
accumulated depreciation of $211,026
in 1999 and $180,255 in 1998 5,467,051 8,048,921
Investment real estate, net of accumulated depreciation
of $4,166,244 in 1999 and
$4,000,880 in 1998 2,095,524 2,260,888
Policy loans 137,852,831 133,473,608
Cash and short-term investments 78,892,569 208,351,098
Other invested assets 132,785,146 90,478,302
------------- -------------
Total cash and invested assets 8,881,350,733 8,482,550,149
Premiums deferred and uncollected 122,227,550 112,869,786
Investment income due and accrued 87,758,433 83,741,880
Electronic data processing equipment, net of accumulated depreciation
of $85,709,043 in 1999 and $83,572,760 in 1998 23,152,822 40,003,368
Receivable from parent, subsidiaries and affiliates 61,263,672 64,865,536
Other assets 108,508,586 110,226,256
Separate accounts assets 1,463,646,824 1,128,411,359
------------- -------------
Total admitted assets $ 10,747,908,620 $10,022,668,334
============== ===============
LIABILITIES
Policy reserves:
Aggregate reserve for policies and contracts $ 6,380,304,112 $6,115,600,947
Liability for premium and other deposit funds 1,828,111,153 1,767,287,656
Policy and contract claims 79,515,156 69,435,931
Other 73,438,833 73,861,169
------------- -------------
Total policy reserves 8,361,369,254 8,026,185,703
Interest maintenance reserve 27,418,733 28,297,114
Asset valuation reserve 122,704,340 99,408,763
General expenses and taxes due or accrued 34,725,171 34,224,408
Federal income taxes due or accrued 24,753,676 30,643,535
Other liabilities 55,493,246 78,153,618
Separate accounts liabilities 1,434,665,900 1,106,149,444
------------- -------------
Total liabilities 10,061,130,320 9,403,062,585
-------------- -------------
SURPLUS
Capital stock, $10 par value, 900,000 shares
authorized issued and outstanding 9,000,000 9,000,000
Gross paid-in and contributed surplus 62,723,580 62,723,580
Unassigned surplus 615,054,720 547,882,169
------------- -------------
Total surplus 686,778,300 619,605,749
------------- -------------
Total liabilities and surplus $10,747,908,620 $10,022,668,334
============== ===============
The accompanying notes are an integral part of these statutory basis financial statements.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------
1999 1998 1997
Income:
<S> <C> <C> <C>
Net premiums and annuity considerations $1,140,044,210 $1,084,975,517 $1,187,103,621
Other considerations and fund deposits 275,898,803 236,637,747 293,227,972
Net investment income 612,041,206 579,276,068 587,480,573
Other income 61,053,155 44,797,965 25,019,350
------------- ------------- -------------
Total income 2,089,037,374 1,945,687,297 2,092,831,516
------------- ------------- -------------
Benefits and expenses:
Policyholder and beneficiary benefits 1,284,737,992 1,163,584,636 1,030,686,286
Increase in reserves for policyholder and
beneficiary benefits 263,438,655 262,888,025 365,393,381
Commissions 118,993,023 118,498,787 130,342,914
Operating expenses 231,963,954 225,066,608 208,126,020
Net transfers to separate accounts 101,849,962 87,759,133 278,479,918
------------- ------------- -------------
Total benefits and expenses 2,000,983,586 1,857,797,189 2,013,028,519
------------- ------------- -------------
Net gain from operations before federal
income taxes and
net realized capital gains 88,053,788 87,890,108 79,802,997
Federal income taxes 45,205,000 47,032,000 37,918,000
------------- ------------- -------------
Net gain from operations before net
realized capital gains 42,848,788 40,858,108 41,884,997
Net realized capital gains 12,124,165 8,691,807 51,537,439
------------- ------------- -------------
Net income $ 54,972,953 $ 49,549,915 $ 93,422,436
============= ============= =============
The accompanying notes are an integral part of these statutory basis financial statements.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF CHANGES IN SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------------------------
1999 1998 1997
Capital stock:
<S> <C> <C> <C>
Balance at beginning and end of year $ 9,000,000 $ 9,000,000 $ 9,000,000
---------- ---------- ----------
Gross paid-in and contributed surplus:
Balance at beginning and end of year 62,723,580 62,723,580 62,723,580
---------- ---------- ----------
Unassigned surplus:
Balance at beginning of year 547,882,169 516,351,285 463,096,236
Net income 54,972,953 49,549,915 93,422,436
Change in net unrealized capital gains and losses 25,943,741 (1,875,466) (45,543,494)
(Increase) decrease in:
Non-admitted assets 5,596,094 3,153,680 (15,448,463)
Asset valuation reserve (23,295,577) (5,265,183) 20,352,007
Additional pension plan contribution 0 (9,732,000) 0
Change in group pension reserve valuation basis 0 0 17,437,454
Adoption of actuarial guidelines 0 0 (17,235,000)
Surplus contributed to separate account 0 0 (20,000,000)
Change in surplus in separate account 3,964,183 0 20,000,000
Other, net (8,843) (4,300,062) 270,109
---------- ---------- ----------
Balance at end of year 615,054,720 547,882,169 516,351,285
----------- ----------- -----------
Total surplus $ 686,778,300 $ 619,605,749 $ 588,074,865
=========== =========== ===========
The accompanying notes are an integral part of these statutory basis financial statements.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
STATUTORY BASIS STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Cash from operations:
Premiums, annuity considerations and
other fund deposits $ 1,405,400,064 $ 1,318,297,844 $ 1,467,305,934
Net investment income 592,873,645 568,917,450 572,888,599
Other income 67,077,830 38,788,628 24,599,736
Benefits (1,277,572,534) (1,167,243,929) (1,015,334,974)
Commissions and general expenses (344,072,398) (364,713,014) (358,217,598)
Federal income taxes (57,072,123) (6,095,871) (50,033,368)
Net transfers to separate accounts (104,327,662) (88,584,356) (291,034,339)
------------- ------------ -------------
Net cash from operations 282,306,822 299,366,752 350,173,990
------------- ------------ -------------
Cash from investments:
Proceeds from investments sold, redeemed or matured:
Bonds 1,522,098,100 1,193,524,488 1,061,409,895
Mortgage loans 88,676,462 146,103,815 335,103,045
Stocks 17,382,690 9,347,151 143,363,377
Real estate 4,050,000 26,750,000 37,927,500
Other invested assets 39,411,955 25,274,875 40,376,307
Tax on capital gains (7,555,834) (34,196,691) (15,797,771)
Cost of investments acquired:
Bonds (1,941,582,149) (1,502,417,064) (1,774,643,430)
Mortgage loans (141,987,030) (152,354,622) (19,862,952)
Stocks (12,911,323) (8,357,754) (23,479,436)
Other invested assets (25,079,860) (38,744,814) (27,563,717)
Real estate (1,777,668) (7,991,164) (3,082,524)
Net increase in policy loans (4,380,901) (7,849,129) (7,474,627)
------------- ------------ -------------
Net cash from investments (463,655,558) (350,910,909) (253,724,333)
------------- ------------ -------------
Cash from financing and other sources:
Decrease (increase) in receivable from parent,
subsidiaries and affiliates 53,617,926 (78,025,309) (28,781,394)
Increase (decrease) in other nonqualified deposits 58,702,188 213,068,165 (49,216,009)
Other cash provided 52,076,765 18,348,507 18,880,708
Other cash used (112,506,672) (8,691,343) (39,639,966)
------------- ------------ -------------
Net cash from financing and other sources 51,890,207 144,700,020 (98,756,661)
------------- ------------ -------------
Net change in cash and short-term investments (129,458,529) 93,155,863 (2,307,004)
Cash and short-term investments:
Beginning of year 208,351,098 115,195,235 117,502,239
------------- ------------ -------------
End of year $ 78,892,569 $ 208,351,098 $ 115,195,235
============= ============ =============
The accompanying notes are an integral part of these statutory basis financial statements.
</TABLE>
54
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
NOTES TO STATUTORY BASIS FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - United of Omaha Life Insurance Company (the
"Company") is a wholly-owned subsidiary of Mutual of Omaha Insurance Company
("Mutual of Omaha"), a mutual health and accident and life insurance company
domiciled in the State of Nebraska. At December 31, 1999, the Company owned 100%
of the outstanding common stock of the following entities: Companion Life
Insurance Company ("Companion"), United World Life Insurance Company ("United
World"), Mutual of Omaha Structured Settlement Company-Connecticut
("MOSSCO-CT"), and Mutual of Omaha Structured Settlement Company of New York,
Inc. ("MOSSCO-NY"). The Company has insurance licenses to operate in 49 states,
the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
Individual life insurance and annuity products are sold through a network of
career agents, direct mail, brokers, financial planners and banks. Group
business is produced by representatives located in Mutual of Omaha group offices
throughout the country.
BASIS OF PRESENTATION - The accompanying financial statements have been
prepared in conformity with accounting practices prescribed or permitted by the
Insurance Department of the State of Nebraska. Prescribed statutory accounting
practices are contained in a variety of publications of the National Association
of Insurance Commissioners ("NAIC"), as well as state laws, regulations, and
general administrative rules. Permitted statutory accounting practices encompass
all accounting practices which may not necessarily be prescribed but are not
prohibited.
The accompanying statutory financial statements vary in some respects from
those that would be presented in conformity with generally accepted accounting
principles. The most significant differences include: (a) bonds are generally
carried at amortized cost rather than being valued at either amortized cost or
fair value based on their classification according to the Company's ability and
intent to hold or trade the securities; (b) acquisition costs, such as
commissions and other costs related to acquiring new business, are charged to
operations as incurred and not deferred, whereas premiums are taken into income
on a pro rata basis over the respective term of the policies; (c) deferred
federal income taxes are not provided for temporary differences between tax and
financial reporting; (d) no provision has been made for federal income taxes on
unrealized appreciation of investments which are carried at market value; (e)
asset valuation reserves ("AVR") and interest maintenance reserves ("IMR") are
established; (f) different actuarial assumptions are used for calculating
certain policy reserves; (g) changes in certain assets designated as
"non-admitted" have been charged to unassigned surplus; (h) comprehensive income
and its components are not presented in the financial statements; and (i) the
change in the underlying book value of wholly-owned subsidiaries is reported as
a change in net unrealized capital gains (losses), a component of unassigned
surplus, rather than as a component of the Company's net income.
USE OF ESTIMATES - The preparation of financial statements in accordance
with statutory accounting practices requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ significantly from those
estimates.
INVESTMENTS - Bonds are generally stated at amortized cost. Premiums and
discounts on bonds not backed by other loans are amortized using the scientific
method. Premiums and discounts on loan-backed bonds and structured securities
are amortized using the retrospective method based on anticipated prepayments at
the date of purchase. Changes in estimated cash flows from the original purchase
assumptions are accounted for using the retrospective method. Preferred stocks
are stated at cost. Common stocks of unaffiliated companies are stated at
estimated fair value and stocks of affiliated companies (principally insurance
companies) are valued at the Company's equity in the underlying book value. The
change in the stated value is recorded as a change in net unrealized capital
gains (losses), a component of unassigned surplus, ignoring the effect of income
taxes.
Mortgage loans and policy loans are stated at the aggregate unpaid balance.
In accordance with statutory accounting practices, the Company records a general
reserve for losses on mortgage loans as part of the asset valuation reserve.
The home office properties, investment real estate, and electronic data
processing equipment are valued at cost, less accumulated depreciation. Property
acquired in satisfaction of debt is initially valued at the lower of cost or
estimated fair value. Depreciation is provided on the straight-line basis over
the estimated useful lives of the related assets.
Short-term investments include all investments whose maturities, at the time
of acquisition, are one year or less and are stated at cost which approximates
market.
55
<PAGE>
Investment income is recorded when earned. Realized gains and losses on the
sale or maturity of investments are determined on the specific identification
basis. Any portion of invested assets designated as "non-admitted" is excluded
from the statutory basis statements of admitted assets, liabilities and surplus.
ASSET VALUATION AND INTEREST MAINTENANCE RESERVES - The Company establishes
certain reserves as promulgated by the NAIC. The AVR is established for the
specific risk characteristics of invested assets of the Company. The IMR is
established for the realized gains and losses on the redemption of fixed income
securities resulting from changes in interest rates, net of tax. Gains and
losses pertaining to the IMR are subsequently amortized into investment income
over the expected remaining period to maturity of the investments sold or
called.
POLICY RESERVES - Policy reserves provide amounts adequate to discharge
estimated future obligations in excess of estimated future premiums on policies
in force. Reserves for life policies are computed principally by using the
Commissioners' Reserve Valuation Method ("CRVM") or the Net Level Premium Method
with assumed interest rates (2.5% to 6%) and mortality (American Experience,
1941 CSO, 1958 CSO, 1960 CSG and 1980 CSO tables) as prescribed by regulatory
authorities. Reserves for annuities and deposit administration contracts are
computed on the basis of interest rates ranging from 2.5% to 12.75%. Policy and
contract claim liabilities include provisions for reported claims and estimates
for claims incurred but not reported. To the extent the ultimate liability
differs from the amounts recorded, such differences are reflected in operations
when additional information becomes known.
PREMIUMS AND RELATED COMMISSIONS - Premiums are recognized as income over
the premium paying period of the policies. Commissions and other expenses
related to the acquisition of policies are charged to operations as incurred.
FEDERAL INCOME TAXES - The Company files a consolidated federal income tax
return with its parent and other eligible subsidiaries. The method of allocating
taxes among the companies is prescribed by a written agreement approved by the
Board of Directors. Each company's provision for federal income taxes is based
on a separate return calculation with each company recognizing tax benefits of
net operating losses and tax credits on a separate return basis.
The provision for federal income taxes is based on income which is currently
taxable. Deferred federal income taxes are not provided for temporary
differences between income tax and statutory reporting. The Company recognizes
the benefits of net operating loss, foreign tax and general business credit
carryforwards when realized.
NON-ADMITTED ASSETS - Certain assets designated as "non-admitted",
principally receivables greater than ninety days due and office furniture and
equipment, are excluded from the statutory basis statements of admitted assets,
liabilities, and surplus. The net change in such assets is charged or credited
to unassigned surplus.
FAIR VALUES OF FINANCIAL INSTRUMENTS - The following methods and assumptions
were used by the Company in estimating its fair value disclosures for financial
instruments:
CASH, SHORT-TERM INVESTMENTS AND OTHER INVESTED ASSETS - The carrying
amounts for these instruments approximate their fair values.
BONDS - The fair values for bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values are estimated
using values obtained from independent pricing services and based on
expected future cash flows using a current market rate applicable to the
yield, credit quality and maturity of the investments.
UNAFFILIATED COMMON STOCKS - The fair values for unaffiliated common
stocks are based on quoted market prices.
AFFILIATED COMMON STOCK - The fair values of affiliated common stocks are
based on the Company's equity in the underlying book value.
PREFERRED STOCKS - The fair values for preferred stocks are based on
quoted market prices.
MORTGAGE LOANS - The fair values for mortgage loans are estimated using
discounted cash flow calculations which are based on interest rates
currently being offered for similar loans to borrowers with similar
credit ratings, credit quality, and maturity of the investments.
POLICY LOANS - The Company does not believe an estimate of the fair value
of policy loans can be made without incurring excessive cost. Policy
loans have no stated maturities and are usually repaid by reductions to
benefits and surrenders. Because of the numerous assumptions which would
have to be made to estimate fair value, the Company believes that such
information would not be meaningful.
56
<PAGE>
INVESTMENT CONTRACTS - The fair values for liabilities under
investment-type insurance contracts are estimated using discounted cash
flow calculations, which are based on interest rates currently being
offered for similar contracts with maturities consistent with those
remaining for the contracts being valued.
DERIVATIVES - The fair value of interest-rate swaps, foreign currency
swaps and interest-rate caps represents the amount at which the contracts
could be settled based upon estimates obtained from issuing brokers. The
fair value of equity-linked notes represents the appreciation of the
underlying debt security based upon the accumulative return of the
designated index.
DERIVATIVES - The Company invests in certain derivative financial
instruments to reduce exposure to interest-rate risks associated with assets
held or liabilities incurred. Derivative financial instruments utilized by the
Company include interest-rate swaps, interest-rate caps and equity-linked notes.
The Company does not engage in trading of these instruments.
Interest-rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amount. Net settlement amounts are reported as adjustments
to net investment income on an accrual basis over the life of the swap
agreement. Gains and losses resulting from early termination of interest-rate
swaps used for hedging are deferred and amortized over the remaining period
originally covered by the swap. The Company enters into interest-rate swap
agreements to manage interest-rate exposure. The primary purpose for the
interest-rate swap agreements is to modify the interest-rate sensitivities of
certain investments so that they are highly correlated with the interest-rate
sensitivities of certain insurance liabilities.
Interest-rate caps represent a right to receive the excess of a referenced
interest rate over a given rate in exchange for the payment of a premium.
Premiums are amortized and recorded as an adjustment to net investment income
over the life of the investment using the effective interest method. The Company
uses interest-rate caps to more effectively manage interest-rate risk associated
with single premium deferred annuity contracts. This allows the Company to limit
the risk associated with an increase in interest rates.
Equity-linked notes are stated at amortized cost. These instruments pay
interest based on a very modest (or no) semi-annual or annual coupon rate and
pay at maturity all principal plus "contingent" interest based on a coupon rate
equal to the percentage increase in a designated index. If the index has
declined over the term of the note, no contingent interest is payable, but at
maturity all principal would nevertheless be payable. The designated index is
typically linked to the performance of a known stock index or basket of indices.
Interest income is accrued at the coupon rate while "contingent" interest is
recognized upon maturity. The Company uses equity-linked notes to more cost
effectively diversify its exposure to equity markets and as an asset replication
instrument to match the liabilities of certain group annuity contracts where the
customer seeks equity market participation. Equity-linked notes help reduce the
Company's exposure to fluctuations in equity instruments by linking a
substantial portion of their expected total return to certain market indices
while preserving the invested principal.
SEPARATE ACCOUNTS - The assets of the separate accounts shown in the
statutory basis statements of admitted assets are carried at fair value and
consist primarily of common stock, mutual funds and commercial paper held by the
Company for the benefit of certificate holders under specific individual and
group annuity contracts. Deposits received from, and benefits paid to, separate
account certificate holders are reflected in the statutory basis statements of
income, but are offset by transfers from the separate accounts. Net investment
income and realized capital gains and losses on the separate accounts are not
reflected in the statutory basis statements of income. Mortality, policy
administration and surrender charges to all separate accounts are included in
revenue.
RECLASSIFICATIONS - Certain reclassifications have been made to the prior
year amounts to conform with current year presentation with no changes to
unassigned surplus or net income.
57
<PAGE>
<TABLE>
<CAPTION>
2. INVESTMENTS
The cost or amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value of the Company's investment securities were as follows:
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
At December 31, 1999:
<S> <C> <C> <C> <C>
U.S. Government $ 46,168,157 $ 457 $ 3,177,130 $ 42,991,484
Political subdivisions 8,901,869 29,232 153,840 8,777,261
Mortgage-backed securities 548,241,963 1,154,597 20,511,842 528,884,718
Special revenue 78,011,554 1,991,241 544,672 79,458,123
Public utilities 437,618,913 5,884,840 10,832,743 432,671,010
Industrial and
miscellaneous 5,314,640,630 86,295,749 162,461,206 5,238,475,173
Collateralized mortgage
obligations 1,143,743,612 12,587,089 21,602,019 1,134,728,682
Credit-tenant loans 192,017,120 1,909,775 5,299,337 188,627,558
------------- ----------- ----------- -------------
Total $ 7,769,343,818 $ 109,852,980 $ 224,582,789 $ 7,654,614,009
============= =========== =========== =============
Bonds $ 7,688,459,932
Short-term investments 80,883,886
-------------
$ 7,769,343,818
==============
Preferred stocks $ 0 $ 0 $ 0 $ 0
============= =========== =========== =============
Common stocks - unaffiliated $ 19,336 $ 9,964,664 $ 0 $ 9,984,000
============= =========== =========== =============
The amortized cost of bonds includes $1,687,273 of non-admitted assets
related to bonds that were in or near default.
58
<PAGE>
Cost or Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
At December 31, 1998:
U.S. Government $ 30,199,066 $ 2,299,673 $ 62,962 $ 32,435,777
Political subdivisions 10,549,019 301,829 20 10,850,828
Mortgage-backed securities 380,824,126 15,036,684 2,221,337 393,639,473
Special revenue 52,399,410 3,220,019 0 55,619,429
Public utilities 419,752,875 21,077,425 1,270,460 439,559,840
Industrial and miscellaneous 4,991,608,991 186,244,422 32,747,478 5,145,105,935
Collateralized mortgage
obligations 1,370,459,693 38,427,779 3,697,538 1,405,189,934
Credit-tenant loans 219,090,991 20,303,274 179,976 239,214,289
------------- ----------- ---------- -------------
Total $ 7,474,884,171 $ 286,911,105 $ 40,179,771 $ 7,721,615,505
============= =========== ========== =============
Bonds $ 7,257,722,248
Short-term investments 214,404,693
-------------
$ 7,472,126,941
=============
Preferred stocks $ 3,954,659 $ 2,036,021 $ 0 $ 5,990,680
========= ========= ======== ==========
Common stocks - unaffiliated $ 165,254 $ 13,722,869 $ 50,000 $ 13,838,123
========= ========= ======== ==========
</TABLE>
The amortized cost of bonds includes $4,504,881 of non-admitted assets
related to bonds that were in or near default.
The amortized cost and estimated fair value of debt securities at December
31, 1999, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
<S> <C> <C>
Due in one year or less $ 388,795,092 $ 388,940,177
Due after one year through five years 1,468,765,587 1,484,657,528
Due after five years through ten years 1,794,735,444 1,750,136,290
Due after ten years 2,425,062,120 2,367,266,614
------------- -------------
6,077,358,243 5,991,000,609
Collateralized mortgage obligations and mortgage backed
securities 1,691,985,575 1,663,613,400
------------- -------------
$ 7,769,343,818 $ 7,654,614,009
============= =============
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
The sources of net investment income were as follows:
1999 1998 1997
<S> <C> <C> <C>
Bonds $544,343,674 $515,151,979 $501,101,332
Preferred stocks 87,536 299,096 398,794
Common stocks 161,075 145,600 448,589
Mortgage loans 49,565,958 52,305,094 70,469,627
Real estate 18,318,351 19,833,382 25,531,545
Policy loans 9,465,535 7,323,862 7,454,749
Short-term investments 7,990,378 4,961,823 4,657,874
Other (2,910,505) (1,969,054) (1,239,823)
----------- ----------- -----------
627,022,002 598,051,782 608,822,687
Investment expense (19,083,356) (22,067,317) (25,194,958)
Amortization of interest maintenance
reserve 4,102,560 3,291,603 3,852,844
----------- ----------- -----------
$612,041,206 $579,276,068 $587,480,573
=========== =========== ===========
Gross realized gains and losses from investment securities consist of the
following:
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1999:
Bonds $ 5,963,118 $4,998,234 $ 964,884
Common stocks 112,286 1,716,877 (1,604,591)
Preferred stocks 1,975,380 0 1,975,380
Mortgage loans 2,313,158 0 2,313,158
Real estate 779,916 0 779,916
Other invested assets 19,800,435 647,740 19,152,695
----------- --------- -----------
$30,944,293 $7,362,851 23,581,442
========== =========
Capital gains tax (8,233,097)
Transfer to IMR (3,224,180)
----------
Net realized capital gains $12,124,165
==========
60
<PAGE>
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1998:
Bonds $13,939,103 $ 239,888 $13,699,215
Common stocks 375,644 54,386 321,258
Mortgage loans 5,818,177 180,586 5,637,591
Real estate 4,248,433 697,886 3,550,547
Other 9,711,346 76,758 9,634,588
----------- ---------- -----------
$34,092,703 $1,249,504 32,843,199
========== =========
Capital gains tax (11,465,087)
Transfer to IMR (12,686,305)
----------
Net realized capital gains $ 8,691,807
=========
Net
Gross Gross Realized
Realized Realized Gains
Gains Losses (Losses)
Year ended December 31, 1997:
Bonds $ 8,303,767 $ 5,237,203 $ 3,066,564
Common stocks 64,382,938 4,130,324 60,252,614
Mortgage loans 1,519,891 5,317,698 (3,797,807)
Real estate 2,799,542 5,108,653 (2,309,111)
Derivative instruments 7,544 8,910,996 (8,903,452)
Other 24,572,499 48,747 24,523,752
----------- ----------- -----------
$101,586,181 $28,753,621 72,832,560
=========== ==========
Capital gains tax (25,411,492)
Transfer to IMR 4,116,371
-----------
Net realized capital gains $51,537,439
===========
</TABLE>
Proceeds from the sale of bonds were $321,474,524, $141,015,129 and
$265,701,061 during 1999, 1998 and 1997, respectively.
The Company invests in mortgage loans collateralized principally by
commercial real estate. The maximum and minimum lending rates for mortgage loans
during 1999 ranged from 6.4% to 9.6%. The maximum percentage of any one loan to
the value of security at the time the loan was originated, exclusive of insured,
guaranteed or purchase money mortgages, was 75%. The estimated fair value of the
mortgage loan portfolio was $652,163,412 and $645,961,540 at December 31, 1999
and 1998, respectively.
61
<PAGE>
The Company's mortgage loans finance various types of commercial properties
throughout the United States. The geographic distributions of the mortgage loans
at December 31, 1999 and 1998 were as follows:
1999 1998
Texas $ 76,057,533 $ 43,616,098
California 49,904,476 39,923,263
Florida 46,980,000 28,948,059
New York 40,206,436 17,553,448
Alabama 34,241,544 34,492,873
Nebraska 31,536,113 34,078,520
All other states 376,150,089 400,783,747
----------- -----------
$655,076,191 $599,396,008
=========== ===========
At December 31, 1999, the Company held non-performing loans of $441,432.
There were no restructured mortgage loans at December 31, 1999. There were no
non-performing or restructured mortgage loans at December 31, 1998.
Securities with an amortized cost of $5,417,960 and $5,493,285 were on
deposit with government agencies at December 31, 1999 and 1998, respectively, as
required by law in various jurisdictions in which the Company conducts business.
The Company has a securities lending program whereby securities are loaned
to third parties, primarily major brokerage firms. Company policy requires a
minimum of 102% of the fair value of the loaned securities to be separately
maintained as collateral for the loans. The collateral is recorded in memorandum
records and is not reflected in the accompanying statutory basis statements of
admitted assets, liabilities and surplus. To further minimize the credit risks
related to this lending program, the Company regularly monitors the financial
condition of counterparties to these agreements and also receives an
indemnification from the financial intermediary who structures the transactions.
The Company has commitments to fund bond investments of approximately
$27,155,005 as of December 31, 1999. The Company also has commitments to fund
mortgage loans of approximately $20,142,500 as of December 31, 1999. These
commitments are legally binding and have fixed expiration dates or other
termination clauses that may require a payment of a fee. In the event that the
financial condition of a borrower deteriorates materially, the commitment may be
terminated. Since some of the commitments may expire or terminate, the total
commitments do not necessarily represent future liquidity requirements.
3. DERIVATIVE FINANCIAL INSTRUMENTS
The following table summarizes the Company's derivative financial
instruments. Notional amounts are used on certain instruments to express the
volume of these transactions, but do not represent the much smaller amounts
potentially subject to credit risk.
<TABLE>
<CAPTION>
ESTIMATED
NOTIONAL STATEMENT FAIR YEAR(S) OF INTEREST RATE
Amount Value Value Maturity Paid Received
At December 31, 1999:
<S> <C> <C> <C> <C> <C> <C>
Interest-rate swaps $ 202,500,000 $ 0 $ 880,563 2002 - 2003 6.97 % 6.23 %
============== ==== =========
Interest-rate caps $ 685,000,000 $ 2,950,371 $ 3,484,314 2000 - 2004 0 0
============= =========== ===========
Equity-linked notes $ 101,000,000 $ 2,360,800 $89,887,364 2001 -2016 0 0
============= =========== ============
AT DECEMBER 31, 1998:
Interest-rate swaps $ 202,500,000 $ 0 $(9,712,510) 2002 - 2003 6.97 % 6.50 %
============== ==== =============
Interest-rate caps $ 600,000,000 $ 2,924,037 $ 632,846 2000 - 2003 0 0
============= =========== ==========
Equity-linked notes $ 101,000,000 $ 3,541,200 $62,670,541 2001 - 2016 0 0
============= =========== ===========
</TABLE>
62
<PAGE>
These derivative financial instruments involve, to varying degrees, elements
of credit and market risk which are not recognized in the statutory basis
statements of admitted assets, liabilities and surplus. Credit risk is defined
as the possibility that a loss may occur from the failure of another party to
perform in accordance with the terms of the contract which exceeds the value of
existing collateral, if any. Market risk is the possibility that future changes
in market conditions may make the derivative financial instrument less valuable.
The Company evaluates the risk associated with derivatives in much the same way
as the risks with on-balance sheet financial instruments. The derivative's risk
of credit loss is generally a small fraction of the notional value of the
instrument and is represented by the fair value of the derivative financial
instrument. The Company attempts to limit its credit risk by dealing with
creditworthy counterparties and obtaining collateral where appropriate.
The Company has considerable experience in evaluating and managing credit
risk. Each issuer or counterparty is extensively reviewed to evaluate its
financial stability before entering into each agreement and throughout the
period that the financial instrument is owned.
During 1997, the Company terminated two interest-rate swap transactions with
a combined notional amount of $200,000,000 at a cost of approximately
$8,900,000. This amount was charged to IMR in accordance with statutory
accounting practices. These swaps were replaced with four other interest-rate
swap agreements with a combined notional amount of $200,000,000. Terms of the
new interest-rate swaps allow for more frequent repricing of the variable rate
paid by the Company thereby reducing its exposure.
4. FEDERAL INCOME TAXES
The provision for federal income taxes reflects an effective income tax rate
which differs from the prevailing federal income tax rate primarily as a result
of income and expense recognition differences between statutory and income tax
reporting. The major differences include capitalization and amortization of
certain policy acquisition amounts for tax purposes, different methods for
determining statutory and tax insurance reserves, timing of the recognition of
market discounts on bonds and certain accrued expenses, and the acceleration of
depreciation for tax purposes.
The tax returns for 1993 through 1995 are currently under examination by the
Internal Revenue Service ("IRS"). Management believes the result of this
examination will have no material impact on the Company's statutory financial
statements.
Under federal income tax law in effect prior to 1984, the Company
accumulated approximately $31,615,000 of deferred taxable income which could
become subject to income taxes in the future under certain conditions.
Management believes the chance that those conditions will exist is not likely.
5. RETIREMENT BENEFITS
The Company participates with Mutual of Omaha and certain subsidiaries (the
"Companies") in a noncontributory defined benefit plan covering all United
States employees meeting certain minimum requirements. Retirement benefits are
based upon years of credited service and final average earnings history.
Information regarding accrued benefits and net assets has not been
determined on an individual company basis. The Company's allocation of salary
expense was approximately 31%, 28% and 30% of the total Companies' salary
expense in 1999, 1998 and 1997, respectively. The Companies expensed
contributions of $12,971,440, $10,254,308 and $7,972,335 in 1999, 1998 and 1997,
respectively. Total benefit costs were $26,101,000, $26,160,000 and $24,148,000
in 1999, 1998 and 1997, respectively. Plan assets include United of Omaha Life
Insurance Company guaranteed investment contracts of $291,281,000 and
$267,183,000 at December 31, 1999 and 1998, respectively. In 1998, the Companies
changed the plan's assumed annual investment return and, in order to improve the
funding status of the plan, increased the amount that was contributed for 1998.
At December 31, 1998, the Companies recorded a direct charge to surplus of
$37,540,647, which represented an additional contribution of $57,814,647, net of
tax. The Company's share of this contribution was $9,731,808, net of tax. The
valuation date for the pension benefit amounts in the table below is January 1,
1999.
The Companies also provide certain postretirement medical and life insurance
benefits to employees hired before January 1, 1995. Benefits are based on hire
date, age and years of service. The cost of these postretirement benefits is
allocated to the Companies in accordance with an intercompany cost-sharing
agreement. Plan assets are invested in a United of Omaha Life Insurance Company
investment contract. The Companies use the accrual method of accounting for
postretirement benefits and elected to amortize the original transition
obligation over 20 years. Employer contributions for other benefits were
$3,684,000, $2,709,000 and $2,600,000 during the years ended December 31, 1999,
1998 and 1997, respectively. Total benefit costs were $10,129,600, $9,853,410
and $11,602,000 in 1999, 1998 and 1997, respectively.
63
<PAGE>
<TABLE>
<CAPTION>
January 1, December 31,
Pension Benefits Other Benefits
---------------------- ---------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Benefit obligation $ 475,851,413 $ 445,896,799 $ 90,913,152 $ 88,227,132
Fair value of plan assets 458,944,992 389,955,899 9,564,322 5,641,539
----------- ----------- ---------- ----------
Funded status $ (16,906,421) $ (55,940,900) $(81,348,830) $(82,585,593)
=========== =========== ========== ============
Pension Benefits Other Benefits
----------------- ----------------
Weighted average assumptions 1999 1998 1999 1998
Discount rate 6.55 % 6.73 % 7.75 % 7.00 %
Expected return on plan assets 9.00 % 9.00 % N/A N/A
Rate of compensation increase 5.00 % 5.00 % N/A N/A
Health care cost trend rate N/A N/A 5.00 % 5.00 %
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the Companies'
accumulated postretirement benefit obligation as of December 31, 1999 by
approximately $6,200,000 and the estimated eligibility and interest cost
components of the net periodic postretirement benefit costs for 1999 by
approximately $800,000.
The Companies sponsor various savings and investment plans. The expense for
defined contribution plans was $10,526,000, $6,472,000 and $14,817,000 in 1999,
1998 and 1997, respectively.
6. RELATED PARTY TRANSACTIONS
The home office properties are occupied jointly by the Company, Mutual of
Omaha and certain affiliates. Because of this relationship, the Companies incur
joint operating expenses subject to allocation. Management believes the method
of allocating such expenses is fair and reasonable.
The Company paid $302,133, $410,598 and $427,447 during 1999, 1998 and 1997,
respectively, to Kirkpatrick, Pettis, Smith, Polian, Inc., an affiliate, for
equity investment management services. In addition, the Company paid assignment
fees of $750 to MOSSCO-CT for the year ended December 31, 1999, $7,500 to
MOSSCO-CT for the year ended December 31, 1998, and $165,000 to MOSSCO-NY and
MOSSCO-CT for the year ended December 31, 1997.
Under the terms of a reinsurance treaty effected June 1, 1955, all health
and accident insurance written by the Company is ceded to Mutual of Omaha. The
operating results of certain lines of group health and accident and life
insurance are shared equally by the Company and Mutual of Omaha. The amounts
ceded were as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Aggregate reserve for policies and contracts $ 91,073,753 $84,042,215
========== ==========
Policy and contract claims $100,988,273 $98,669,575
=========== ==========
1999 1998 1997
Premium considerations $440,864,375 $387,138,546 $378,854,027
=========== =========== ===========
Policyholder and beneficiary benefits $370,484,415 $337,101,103 $286,033,083
=========== =========== ===========
Group reinsurance settlement expense
(included in operating expenses) $ 25,391,147 $ 18,777,060 $ 10,405,717
=========== =========== ===========
</TABLE>
64
<PAGE>
The Company also assumes group and individual life insurance from Companion.
The Company entered into a coinsurance treaty with Companion relating to bank
annuity business in which Companion cedes 90% of the 1999 and 1998 related
premiums to the Company and the Company pays 90% of the related benefits, in
1999 and 1998, respectively. The total amounts assumed by the Company relating
to the treaties with Companion were as follows:
1999 1998
Aggregate reserve for policies and contracts $67,290,793 $47,633,504
========== ==========
Policy and contract claims $ 2,740,908 $ 2,916,924
========== ==========
The amounts assumed by the Company from Companion and included in the
statutory statements of income were as follows:
1999 1998 1997
Premium considerations $23,134,359 $19,789,981 $31,343,629
========== ========== ==========
Policyholder and beneficiary benefits $ 7,951,294 $ 7,559,683 $ 3,570,731
========== ========== ==========
7. REINSURANCE
In the normal course of business, the Company assumes and cedes insurance
business. The ceding of insurance business does not discharge an insurer from
its primary legal liability to a policyholder. The Company remains liable to the
extent that a reinsurer is unable to meet its obligations.
The reconciliation of total premiums to net premiums is as follows:
1999 1998 1997
Direct $ 1,567,106,907 $ 1,460,515,466 $ 1,541,126,581
Assumed:
Affiliated 23,134,359 19,789,981 31,343,629
Nonaffiliates 32,345,121 26,437,129 23,548,361
Ceded:
Affiliated (440,864,375) (387,138,546) (378,854,027)
Nonaffiliated (41,677,802) (34,628,513) (30,060,923)
-------------- -------------- -------------
Net $ 1,140,044,210 $ 1,084,975,517 $ 1,187,103,621
============= ============= =============
8. CREDIT ARRANGEMENTS
The Company and Mutual of Omaha are authorized by their Boards of Directors
to borrow a maximum of $125,000,000 on a joint basis under certain lines of
credit. At December 31, 1999, the Company had no outstanding borrowings against
its uncommitted, uncollateralized revolving lines of credit. Interest rates
applicable to borrowings under these lines of credit are negotiated with the
lender at the time of borrowing.
9. COMMITMENTS AND CONTINGENCIES
Various lawsuits have arisen in the ordinary course of the Company's
business. The Company believes that its defenses are meritorious and the
eventual outcome of those lawsuits will not have a material effect on the
Company's financial position.
LEASES - The Company leases certain property to house Home Office operations
in Omaha, Nebraska, from its parent, Mutual of Omaha. The current lease expires
December 31, 2035.
65
<PAGE>
The Company and Mutual of Omaha rent office space, equipment and computer
software under noncancellable operating leases. Future required minimum rental
payments under those leases as of December 31, 1999 were approximately:
2000 $20,124,290
2001 14,722,563
2002 9,635,808
2003 5,475,019
2004 2,572,647
Thereafter 2,938,052
------------
Total $55,468,379
============
10. DEPOSIT FUNDS
The estimated fair value and statement value of guaranteed investment and
select maturity contracts were:
1999 1998
Estimated fair value $ 1,138,068,000 $ 1,346,065,000
============= =============
Statement value $ 1,406,712,000 $ 1,353,266,000
============= =============
The fair values of liabilities under all insurance contracts are taken into
consideration in the Company's overall management of interest-rate risk, which
minimizes exposure to changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
At December 31, 1999 and 1998, the Company held annuity reserves and deposit
fund liabilities of $2,472,653,621 and $1,877,116,893, respectively, that were
subject to discretionary withdrawal at book value with a surrender charge of
less than 5%.
11. STOCKHOLDER DIVIDENDS
Regulatory restrictions limit the amount of dividends available for
distribution without prior approval of regulatory authorities. The maximum
amount of dividends which can be paid to the stockholder without prior approval
of the Director of Insurance of the State of Nebraska is the greater of 10% of
the insurer's surplus as of the previous December 31 or net gain from operations
for the previous twelve month period ending December 31. Based upon these
restrictions, the Company is permitted a maximum dividend distribution of
$67,777,830 in 2000.
12. BUSINESS RISKS
The Company is subject to regulation by state insurance departments and
undergoes periodic examinations by those departments. The following is a
description of the most significant risks facing life and health insurers and
how the Company manages those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will occur and create
additional costs or expenses not anticipated by the insurer in pricing
its products. The Company mitigates this risk by operating throughout the
United States, thus reducing its exposure to any single jurisdiction, and
by diversifying its products.
CREDIT RISK is the risk that issuers of securities owned by the
Company will default, or that other parties, including reinsurers which
owe the Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy and by maintaining sound
reinsurance, credit and collection policies.
INTEREST-RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. The Company
mitigates this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, the Company may
have to sell assets prior to maturity and recognize a gain or loss.
66
<PAGE>
13. RECONCILIATION OF STATUTORY NET INCOME AND SURPLUS TO GAAP NET INCOME
AND EQUITY
As described in Note 1, the Company has prepared these financial statements
in conformity with statutory accounting practices prescribed or permitted by the
Insurance Department of the State of Nebraska. These practices differ from
generally accepted accounting principles (GAAP). The following tables reconcile
statutory net income to GAAP net income and statutory surplus to GAAP equity.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Statutory net income as reported $ 54,972,953 $ 49,549,915 $ 93,422,436
Future policy benefits and policyholder
account balances 14,442,932 (36,682,957) (39,572,000)
Deferred policy acquisition costs 28,205,163 47,066,276 63,151,000
Deferred income taxes and other tax
reclassifications (6,785,000) 16,252,000 (4,793,000)
Valuation of investments 15,115,420 (118,976) 14,183,000
Earnings of subsidiaries 10,828,173 10,515,942 7,846,000
Other 2,983,278 7,916,496 (2,833,000)
----------- ---------- ------------
Net income in conformity with generally
accepted accounting principles $ 119,762,919 $ 94,498,696 $131,404,436
=========== =========== ===========
1999 1998
Statutory surplus $ 686,778,300 $ 619,605,749
Future policy benefits and policyholder
account balances (312,316,678) (325,783,497)
Deferred policy acquisition costs 845,530,005 774,559,624
Deferred income taxes (7,514,000) (130,475,000)
Valuation of investments (144,254,888) 261,236,362
Statutory asset valuation reserve 122,704,340 99,408,763
Subsidiary equity 25,350,012 36,681,569
Statutory interest maintenance reserve 27,418,733 28,297,114
Other (13,214,697) 5,138,810
------------ -----------
Equity in conformity with generally
accepted accounting principles $1,230,481,127 $1,368,669,494
============== =============
</TABLE>
14. CODIFICATION OF STATUTORY ACCOUNTING PRINCIPLES
In March 1998, the National Association of Insurance Commissioners adopted
the Codification of Statutory Accounting Principles ("Codification").
Codification, which is intended to standardize regulatory accounting and
reporting for the insurance industry, is proposed to be effective January 1,
2001. During 1999, the State of Nebraska adopted the Codification. The Company
has not finalized the quantification of the effects of Codification on its
statutory financial statements.
67
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Investment income earned:
U.S. Government bonds $ 2,888,604
Other bonds (unaffiliated) 541,455,069
Bonds (affiliated) 0
Preferred stocks (unaffiliated) 87,536
Preferred stocks (affiliated) 0
Common stocks (unaffiliated) 161,075
Common stocks (affiliated) 0
Mortgage loans 49,565,958
Real estate 18,318,351
Premium notes, policy loans and liens 9,465,535
Collateral loans 0
Cash on hand and on deposit 0
Short-term investments 7,990,378
Other invested assets 783,375
Derivative instruments (4,223,126)
Aggregate write-ins for investment income 529,247
-------
Gross investment income $627,022,002
============
Real estate owned - book value less encumbrances $ 84,198,631
============
Mortgage loans - book value:
Farm mortgages $ 0
Residential mortgages 0
Commercial mortgages 655,076,191
-----------
Total mortgage loans $655,076,191
============
Mortgage loans by standing - book value:
Good standing $654,634,759
============
Good standing with restructured terms $ 0
===
Interest overdue more than three months, not in foreclosure $ 441,432
=========
Foreclosure in process $ 0
===
Other long-term assets - statement value $114,018,939
============
Collateral loans $ 0
===
68
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Bonds and stocks of subsidiaries and affiliates - book value:
Bonds $ 0
===
Preferred stocks $ 0
===
Common stocks $ 66,086,000
============
Bonds and short-term investments by class and
expected maturity; Bonds by
expected maturity - statement value:
Due within one year or less $ 955,764,084
Over 1 year and through 5 years 3,069,851,220
Over 5 years through 10 years 2,270,225,205
Over 10 years through 20 years 1,132,674,991
Over 20 years 339,141,045
--------------
Total by maturity 7,767,656,545
==============
Bonds by class - statement value:
Class 1 4,277,993,415
Class 2 3,054,217,918
Class 3 333,664,012
Class 4 97,251,871
Class 5 3,844,571
Class 6 684,758
--------------
Total by class 7,767,656,545
==============
Total bonds publicly traded 3,475,922,697
==============
Total bonds privately placed 4,291,733,848
==============
Preferred stocks - statement value $ 0
===
Common stocks - market value $ 105,772,706
=============
Short-term investments - book value $ 80,883,886
============
Options, caps and floors owned - statement value $ 5,311,171
===========
Options, caps and floors written and in force - statement valu $ 0
===
Collar, swap and forward agreements open - statement value $ 0
===
Futures contracts open - current value $ 0
===
Cash on deposit $ (1,991,317)
=============
69
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Life insurance in force (in thousands):
Industrial $ 0
===
Ordinary $ 58,020,660
============
Credit life $ 411
=====
Group life $ 65,721,874
============
Amount of accidental death insurance in force
under ordinary policies (in thousands) $ 2,582,244
===========
Life insurance policies with disability provisions
in force (in thousands):
Industrial $ 0
===
Ordinary $ 9,283,592
===========
Credit life $ 0
===
Group life $ 37,209,356
============
Supplementary contracts in force: Ordinary -
not involving life contingencies:
Amount on deposit $ 16,935,580
============
Income payable $ 3,174,827
===========
Ordinary - involving life contingencies - income payable $ 1,521,854
===========
Group - not involving life contingencies:
Amount on deposit $ 0
===
Income payable $ 0
===
Group - involving life contingencies - income payable $ 0
===
Annuities:
Ordinary:
Immediate - amount of income payable $ 44,488,735
============
Deferred - fully paid - account balance $ 2,506,338,292
===============
Deferred - not fully paid - account balance $ 437,543,222
=============
70
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Group:
Amount of income payable $ 169,310,272
=============
Fully paid - account balance $ 108,056,340
=============
Not fully paid - account balance $ 0
===
Accident and health insurance - premiums in force:
Ordinary $ 147,887
=========
Group $ 540,489,071
=============
Credit $ 0
===
Deposit funds and dividend accumulations:
Deposit funds - account balance $ 2,900,133,519
===============
Dividend accumulations - account balance $ 51,107
========
Claim payments 1999:
Group accident and health - year ended December 31, 1999:
1999 $ 0
===
1998 $ 0
===
1997 $ 0
===
1996 $ 0
===
1995 $ 0
===
Prior $ 0
===
71
<PAGE>
UNITED OF OMAHA LIFE INSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF MUTUAL OF OMAHA INSURANCE COMPANY)
ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1999
SCHEDULE 1 - SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
Claim payments 1999:
Other accident and health:
1999 $ 0
===
1998 $ 0
===
1997 $ 0
===
1996 $ 0
===
1995 $ 0
===
Prior $ 0
===
Other coverages that use developmental methods to calculate claim reserves:
1999 $ 1,018
=======
1998 $ 916
=====
1997 $ 611
=====
1996 $ 0
===
1995 $ 0
===
Prior $ 0
===
72
<PAGE>
UNITED OF OMAHA
SEPARATE ACCOUNT B
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT AS OF
DECEMBER 31, 1999 AND FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
73
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
United of Omaha Life Insurance Company
We have audited the accompanying statement of net assets of each of the
sub-accounts ("portfolios" that include American Growth, American Small
Capitalization, Prime Money Fund II, U.S. Government Securities II, Asset
Manager: Growth, Contrafund, Equity Income (Fidelity), Index 500, Capital
Opportunities, Emerging Growth, Global Governments, High Income, Research,
Emerging Markets Equity, Fixed Income, Capital Growth, Real Estate Growth,
Global Discovery, Growth & Income, International (Scudder), Equity Income (T.
Rowe Price), International Stock, Limited-Term Bond, New America Growth and
Personal Strategy Balanced) that comprise United of Omaha Separate Account B
(the "Separate Account") as of December 31, 1999, and the related statements of
operations and changes in net assets for the years ended December 31, 1999 and
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our audit procedures
included confirmations of investments owned as of December 31, 1999 by
correspondence with the transfer agents. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
portfolios constituting the Separate Account as of December 31, 1999, and the
results of their operations and changes in their net assets for the years ended
December 31, 1999 and 1998 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
March 31, 2000
74
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
- ---------------------------------------------------------------------------------------------------
Market
Units Market Value
Assets Cost Outstanding Value Per Unit
<S> <C> <C> <C> <C>
Investments:
Alger:
American Growth $ 820,108 50,256 $ 997,103 $ 19.84
American Small Capitalization 726,307 57,611 970,514 16.85
Federated:
Prime Money Fund II 775,594 696,927 779,514 1.12
U.S. Government Securities II 252,436 22,187 247,061 11.14
Fidelity:
Asset Manager: Growth 308,462 24,516 347,722 14.18
Contrafund 750,152 52,438 884,606 16.87
Equity Income 1,258,592 102,938 1,288,113 12.51
Index 500 2,431,733 170,823 2,793,848 16.36
MFS:
Capital Opportunities 872,963 60,449 1,222,620 20.23
Emerging Growth 507,062 37,164 910,996 24.51
Global Governments 239,550 21,736 232,545 10.70
High Income 368,235 33,520 371,515 11.08
Research 364,908 29,320 454,232 15.49
Morgan Stanley Dean Witter:
Emerging Markets Equity 16,998 1,852 25,447 13.74
Fixed Income 99,543 9,181 95,249 10.37
Pioneer:
Capital Growth 202,455 19,197 211,318 11.01
Real Estate Growth 424,115 46,476 398,994 8.58
Scudder:
Global Discovery 78,621 6,684 129,899 19.43
Growth & Income 302,412 25,398 303,417 11.95
International 602,363 48,326 834,454 17.27
T. Rowe Price:
Equity Income 981,038 78,307 954,536 12.19
International Stock 1,064,896 95,245 1,364,445 14.33
Limited-Term Bond 1,235,014 108,879 1,212,167 11.13
New America Growth 341,897 25,760 372,031 14.44
Personal Strategy Balanced 369,703 28,645 372,361 13.00
-------- --------
Total invested assets $15,395,157 $17,774,707
=========== ===========
LIABILITIES $ - $ -
==== ===
Net assets $15,395,157 $17,774,707
=========== ===========
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Federated
Alger American Prime Money U.S. Government
American Growth Small Capitalization Fund II Securities II
--------------- -------------------- ----------------- -------------
1999 1998 1999 1998 1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Investment income:
Reinvested dividends and
capital gain
distributions $38,671 $ 11,366 $ 48,305 $ 8,650 $ 54,282 $ 18,881 $ 8,489 $ 392
EXPENSES:
Mortality and expense
risk charges 71,726 2,765 68,448 8,039 218,437 58,274 17,599 2,601
------- ------ ------- ------ -------- ------- ------- -----
Net investment
income
(expense) (33,055) 8,601 (20,143) 611 (164,155) (39,393) (9,110) (2,209)
Net realized gains
(losses) 7,145 153 (4,661) 502 - - (66) 60
Net change in unrealized
gains (losses) 134,043 42,952 217,079 28,003 - - (9,417) 4,042
-------- ------- -------- ------- -- -- -------- -----
Net increase (decrease) in
net assets
from operations 108,133 51,706 192,275 29,116 (164,155) (39,393) (18,593) 1,893
Purchases made by
policyowners 580,858 263,465 527,969 231,254 6,815,913 4,625,960 127,030 150,477
Withdrawals made by
policyowners (859) (6,200) (12,576) (13,549) (6,359,502)(4,099,309) - (13,746)
------ -------- --------- --------- ----------- ---------- -- --------
Net policyowner
transactions 579,999 257,265 515,393 217,705 456,411 526,651 127,030 136,731
-------- -------- -------- -------- -------- -------- -------- -------
Increase in net assets 688,132 308,971 707,668 246,821 292,256 487,258 108,437 138,624
Net assets, beginning of
year 308,971 - 262,846 16,025 487,258 - 138,624 -
-------- -- -------- ------- -------- -- -------- -
Net assets, end
of year $997,103 $308,971 $970,514 $262,846 $ 779,514 $ 487,258 $247,061 $138,624
========= ========= ======== ========= ========== ========== ======== ========
ACCUMULATION UNIT:
Purchases 33,337 21,484 40,279 22,730 6,251,733 4,387,914 10,780 13,924
Withdrawals (3,908) (657) (5,045) (1,929) (6,010,506)(3,932,214) (967) (1,550)
-------- ------ -------- -------- ---------- ----------- ------ -------
Net increase in units
outstanding 29,429 20,827 35,234 20,801 241,227 455,700 9,813 12,374
Units outstanding,
beginning of year 20,827 - 22,377 1,576 455,700 - 12,374 -
------- -- ------- ------ -------- -- ------- --
Units outstanding, end
of year 50,256 20,827 57,611 22,377 696,927 455,700 22,187 12,374
======= ======= ======= ======= ======== ======== ======= ======
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
FIDELITY MFS
Asset Manager: Capital
Growth Contrafund Equity Income Index 500 Opportunities
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
- ------------------- ------------------ --------------------- ------------------ -------------------
$ 8,961 $ 594 $ 9,807 $ - $ 23,313 $ 2,077 $ 11,348 $ - $ 1,950 $ 695
29,548 3,976 61,723 7,274 87,933 10,583 194,670 17,250 81,572 8,096
------- ------ ------- ------ ------- ------- -------- ------- ------- -----
(20,587) (3,382) (51,916) (7,274) (64,620) (8,506) (183,322) (17,250) (79,622) (7,401)
1,894 103 23,542 295 4,768 328 25,595 1,117 35,185 (4,935)
26,108 13,152 101,458 32,996 (2,844) 31,982 287,743 74,372 307,124 42,533
------- ------- -------- ------- -------- ------- -------- ------- -------- ------
7,415 9,873 73,084 26,017 (62,696) 23,804 130,016 58,239 262,687 30,197
200,325 141,710 639,630 207,868 919,913 400,198 2,046,812 567,403 708,952 340,877
(3) (11,598) (61,993) - (281) (10,106) (8,622) - (93,578) (26,515)
---- --------- --------- -- ------ --------- -------- -- --------- --------
200,322 130,112 577,637 207,868 919,632 390,092 2,038,190 567,403 615,374 314,362
-------- -------- -------- -------- -------- -------- ---------- -------- -------- -------
207,737 139,985 650,721 233,885 856,936 413,896 2,168,206 625,642 878,061 344,559
139,985 - 233,885 - 431,177 17,281 625,642 - 344,559 -
-------- -- -------- -- -------- ------- -------- -- -------- --
$347,722 $139,985 $884,606 $233,885 $1,288,113 $431,177 $2,793,848 625,642 $1,222,620 344,559
========= ========= ========= ========= =========== ======== =========== ======= ========== =======
15,060 12,686 43,437 17,646 72,986 36,847 134,031 47,021 44,726 28,154
(1,919) (1,311) (8,226) (419) (6,686) (1,848) (9,307) (922) (9,392) (3,039)
-------- -------- -------- ------ -------- -------- -------- ------ -------- -------
13,141 11,375 35,211 17,227 66,300 34,999 124,724 46,099 35,334 25,115
11,375 - 17,227 - 36,638 1,639 46,099 - 25,115 -
------- -- ------- -- ------- ------ ------- -- ------- -
24,516 11,375 52,438 17,227 102,938 36,638 170,823 46,099 60,449 25,115
======= ======= ======= ======= ======== ======= ======== ======= ======= ======
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
MFS (Continued)
Emerging Global High
Growth Governments Income Research
1999 1998 1999 1998 1999 1998 1999 1998
---------------- -------------- ------------- ----------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Reinvested dividends and
capital gain
distributions $ - $ 417 $ 9,015 $ 358 $ 16,608 $ 1,839 $ 3,318 $ 676
EXPENSES:
Mortality and expense
risk charges 41,100 6,901 13,065 3,728 17,976 2,938 26,228 4,486
------- ------ ------- ------ ------- ------ ------- -----
Net investment
income
(expense) (41,100) (6,484) (4,050) (3,370) (1,368) (1,099) (22,910) (3,810)
Net realized gains (losses) 14,600 311 (49) 92 (4,327) (17) 9,012 1,427
Net change in unrealized
gains (losses) 351,148 52,786 (12,869) 5,864 3,269 11 69,566 19,758
-------- ------- --------- ------ ------ --- ------- ------
Net increase (decrease) in
net assets from
operations 324,648 46,613 (16,968) 2,586 (2,426) (1,105) 55,668 17,375
Purchases made by
policyowners 311,858 248,045 128,122 123,463 252,199 180,836 227,784 213,047
Withdrawals made by
policyowners (19,580) (588) (4,658) - (57,989) - (44,593) (15,049)
--------- ------ -------- -- --------- -- --------- --------
Net policyowner
transactions 292,278 247,457 123,464 123,463 194,210 180,836 183,191 197,998
-------- -------- -------- -------- -------- -------- -------- -------
Increase in net assets 616,926 294,070 106,496 126,049 191,784 179,731 238,859 215,373
Net assets, beginning of
year 294,070 - 126,049 - 179,731 - 215,373 -
-------- -- -------- -- -------- -- -------- --
Net assets, end of year $910,996 $294,070 $232,545 $126,049 $371,515 $179,731 $454,232 $215,373
======== ========= ======== ========= ======== ========= ======== ========
ACCUMULATION UNIT:
Purchases 19,755 21,836 11,884 11,719 23,162 17,354 17,249 18,902
Withdrawals (3,790) (637) (1,636) (231) (6,903) (93) (5,174) (1,657)
------- ------ -------- ------ -------- ----- -------- -------
Net increase in units
outstanding 15,965 21,199 10,248 11,488 16,259 17,261 12,075 17,245
Units outstanding,
beginning of year 21,199 - 11,488 - 17,261 - 17,245 -
------- -- ------- -- ------- -- ------- --
Units outstanding, end
of year 37,164 21,199 21,736 11,488 33,520 17,261 29,320 17,245
======= ======= ======= ======= ======= ======= ======= ======
The accompanying notes are an integral part of these financial statements.
78
<PAGE>
Morgan Stanley Dean Witter Pioneer Scudder
Emerging Capital Real Estate Global
Markets Equity Fixed Income Growth Growth Discovery
1999 1998 1999 1998 1999 1998 1999 1998 1999 1998
- ------------------ ---------------- --------------- ------------------ -----------------
$ 2 $ 1 $ 3,922 $ 540 $ 1,412 $ 4,826 $ 19,078 $ 4,653 $ 895 $ 243
1,918 78 2,348 184 17,403 4,248 32,456 5,437 5,528 1,538
------ --- ------ ---- ------- ------ ------- ------ ------ -----
(1,916) (77) 1,574 356 (15,991) 578 (13,378) (784) (4,633) (1,295)
416 (21) (382) 3 (404) 189 (20,050) (1,844) 1,103 52
8,438 11 (3,927) (367) 19,509 (10,107) (6,914) (18,207) 48,399 2,878
------ --- -------- ------ ------- --------- -------- --------- ------- -----
6,938 (87) (2,735) (8) 3,114 (9,340) (40,342) (20,835) 44,869 1,635
18,204 1,414 99,119 13,258 82,811 123,638 316,782 180,129 44,122 39,273
- (1,022) (13,469) (916) - (5,264) (35,498) (1,242) - -
-- -------- --------- ------ -- -------- --------- -------- -- -
18,204 392 85,650 12,342 82,811 118,374 281,284 178,887 44,122 39,273
------- ---- ------- ------- ------- -------- -------- -------- ------- ------
25,142 305 82,915 12,334 85,925 109,034 240,942 158,052 88,991 40,908
305 - 12,334 - 125,393 16,359 158,052 - 40,908 -
---- -- ------- -- -------- ------- -------- -- ------- -
$ 25,447 $ 305 $95,249 $ 12,334 $211,318 $125,393 $398,994 $158,052 $129,899 $ 40,908
========= ====== ========= ======== ========= ========= ========= ======== ======== ========
1,954 58 9,512 1,179 7,072 12,123 35,721 18,400 3,557 3,569
(145) (15) (1,500) (10) (753) (858) (6,887) (758) (359) (83)
------ ----- -------- ----- ------ ------ -------- ------ ------ ----
1,809 43 8,012 1,169 6,319 11,265 28,834 17,642 3,198 3,486
43 - 1,169 - 12,878 1,613 17,642 - 3,486 -
--- -- ------ -- ------- ------ ------- -- ------ -
1,852 43 9,181 1,169 19,197 12,878 46,476 17,642 6,684 3,486
====== === ====== ====== ======= ======= ======= ======= ====== =====
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
UNITED OF OMAHA SEPARATE ACCOUNT B
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 (CONTINUED)
Scudder (Continued) T. Rowe Price
Growth & Equity International
Income International Income Stock
1999 1998 1999 1998 1999 1998 1999 1998
--------------- ---------------- --------------- -----------------
Income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Reinvested dividends and
capital gain
distributiona $19,460 $ 3,390 $ 38,755 $ 3,562 $ 53,337 $ 15,662 $ 19,776 $ 3,891
EXPENSES:
Mortality and expense
risk charges 17,438 5,114 33,754 4,976 72,131 11,208 111,154 11,236
------- ------ ------- ------ ------- ------- -------- -------
Net investment
income
(expense) 2,022 (1,724) 5,001 (1,414) (18,794) 4,454 (91,378) (7,345)
Net realized gains (losses)(2,838) (5,981) 3,708 (56) 1,123 (2,088) 11,708 -
Net change in unrealized
gains (losses) (2,401) 3,406 216,633 15,741 (31,768) 5,180 286,045 13,504
-------- ------ -------- ------- --------- ------ -------- -------
Net increase (decrease) in
net assets from
operations (3,217) (4,299) 225,342 14,271 (49,439) 7,546 206,375 6,159
Purchases made by
policyowners 133,336 223,762 388,844 232,230 618,077 408,975 911,212 250,559
Withdrawals made by
policyowners (10,561) (35,604) (42,847) - (11,001) (37,182) (9,860) -
--------- --------- --------- -- --------- --------- -------- --
Net policyowner
transactions 122,775 188,158 345,997 232,230 607,076 371,793 901,352 250,559
-------- -------- -------- -------- -------- -------- -------- --------
Increase in net assets 119,558 183,859 571,339 246,501 557,637 379,339 1,107,727 256,718
Net assets, beginning of
year 183,859 - 263,115 16,614 396,899 17,560 256,718 -
-------- -- -------- ------- -------- ------- -------- --
Net assets, end of year $ 303,417 $183,859 $ 834,454 $263,115 $954,536 $396,899 $1,364,445 $256,718
========== ========= ========== ========= ========= ========= ========== =========
ACCUMULATION UNIT:
Purchases 11,572 20,246 30,756 22,142 48,679 36,648 78,763 24,075
Withdrawals (2,451) (3,969) (5,974) (360) (4,143) (4,506) (7,409) (184)
-------- -------- -------- ------ -------- -------- -------- ------
Net increase in units
outstanding 9,121 16,277 24,782 21,782 44,536 32,142 71,354 23,891
Units outstanding,
beginning of year 16,277 - 23,544 1,762 33,771 1,629 23,891 -
------- -- ------- ------ ------- ------ ------- --
Units outstanding, end
of year 25,398 16,277 48,326 23,544 78,307 33,771 95,245 23,891
======= ======= ======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
80
<PAGE>
Limited-term New America Personal Strategy
Bond Growth Balanced Total
1999 1998 1999 1998 1999 1998 1999 1998
---------------- -------------- ----------------- -------------------------
$ 46,207 $ 9,298 $ 20,262 $ 2,872 $ 29,555 $ 12,330 $ 486,728 $ 107,213
75,565 8,955 44,536 6,841 15,660 3,936 1,359,916 200,662
------- ------ ------- ------ ------- ------ ---------- -------
(29,358) 343 (24,274) (3,969) 13,895 8,394 (873,188) (93,449)
(2,388) 42 2,752 105 402 351 107,788 (9,812)
(24,110) 1,263 16,457 13,677 (3,159) 5,817 1,995,610 381,247
--------- ------ ------- ------- -------- ------ ---------- -------
(55,856) 1,648 (5,065) 9,813 11,138 14,562 1,230,210 277,986
912,361 443,927 227,730 139,553 104,555 256,715 17,344,518 10,008,036
(67,674) (22,239) - - (3,200) (11,409) (6,858,344) (4,311,538)
--------- --------- -- -- ------- --------- ------------ -----------
844,687 421,688 227,730 139,553 101,355 245,306 10,486,174 5,696,498
-------- -------- -------- -------- -------- -------- ----------- ---------
788,831 423,336 222,665 149,366 112,493 259,868 11,716,384 5,974,484
423,336 - 149,366 - 259,868 - 6,058,323 83,839
-------- -- -------- -- -------- -- ---------- ------
$1,212,167 $423,336 $372,031 $149,366 $372,361 $259,868 $17,774,707 $6,058,323
========== ========= ========= ========= ======== ========= ========== ============
81,504 41,291 16,682 11,817 8,488 23,054
(10,968) (2,948) (2,583) (156) (1,516) (1,381)
--------- -------- -------- ------ -------- -------
70,536 38,343 14,099 11,661 6,972 21,673
38,343 - 11,661 - 21,673 -
------- -- ------- -- ------- -
108,879 38,343 25,760 11,661 28,645 21,673
======== ======= ======= ======= ======= ======
</TABLE>
81
<PAGE>
UNITED OF OMAHA SEPARATE ACCOUNT B
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
United of Omaha Separate Account B ("Separate Account") was established by
United of Omaha Life Insurance Company ("United") on August 13, 1997, under
procedures established by Nebraska law, and is registered as a unit investment
trust under the Investment Company Act of 1940, as amended. The assets of the
Separate Account are owned by United, however the net assets of the Separate
Account are restricted from use in the ordinary business of United.
A separate account policyholder may allocate funds to a fixed income
account, which is part of United's general account, in addition to those
sub-accounts detailed below. Interests in the fixed income account has not been
registered under the Securities Act of 1933 and United has not been registered
as an investment company under the Investment Company Act of 1940, due to
exemptive and exclusionary provisions of such acts.
2. SUB-ACCOUNTS
The Separate Account is divided into sub-accounts, each of which invests
exclusively in shares of a corresponding mutual fund portfolio. The available
portfolios are:
ALGER MORGAN STANLEY DEAN WITTER
American Growth Emerging Markets Equity
American Small Capitalization Fixed Income
FEDERATED PIONEER
Prime Money Fund II Capital Growth
U.S. Government Securities II Real Estate Growth
FIDELITY SCUDDER
Asset Manager: Growth Global Discovery
Contrafund Growth & Income
Equity Income International
Index 500
MFS T. ROWE PRICE
Capital Opportunities Equity Income
Emerging Growth International Stock
Global Governments Limited-Term Bond
High Income New America Growth
Research Personal Strategy Balanced
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
SECURITY VALUATION TRANSACTIONS AND RELATED INVESTMENT INCOME - The market
values of investments are based on the year-end closing bid prices. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed) and dividend income and capital gain distributions are
recorded on the ex-dividend date. Realized gains and losses on the sales of
investments are computed on the specific identification basis. Charges for
investment advisory fees and other expenses are reflected in the net asset
values of the mutual fund portfolios.
FEDERAL INCOME TAXES - Net taxable income or loss of the Separate Account is
included in the federal income tax return of United, which is taxed as a life
insurance company under the Internal Revenue Code. No charges are currently made
to the Separate Account for taxes other than premium taxes and federal deferred
acquisition cost taxes. United reserves the right to levy charges in the future
for taxes or other economic burdens resulting from taxes that United determines
are properly attributable to the Separate Account.
82
<PAGE>
4. ACCOUNT CHARGES
ADMINISTRATIVE CHARGES - For single premium variable life policies, United
deducts an administrative charge on each monthly deduction date. This charge is
set at an annual rate of 0.24% of the accumulation value on each monthly
deduction date. The administrative charge for flexible premium variable life
policies is $84 per year.
TAX EXPENSE CHARGE - For single premium variable life policies, a tax
expense charge will be deducted as part of the monthly deduction from the
accumulation value on each monthly deduction date for the first ten policy years
to reimburse United for state premium taxes, federal deferred acquisition cost
taxes, and related administrative expenses. The annual rate of this charge is
0.39% of the accumulation value. This charge is equal to 3.75% of each premium
payment for flexible premium variable life policies.
MORTALITY AND EXPENSE RISK CHARGES - United deducts a monthly charge as
compensation for the mortality and expense risks assumed by United. This charge
is equal to an annual rate of 0.90% of the accumulation value on each monthly
deduction date for single premium variable life policies. Risk charges for
flexible premium variable life policies are equal to .70% of the accumulation
value, decreasing to .55% after ten years. United guarantees that the mortality
and expense charge will not increase above these levels.
COST OF INSURANCE CHARGE - The cost of insurance charge on single premium
variable life policies is based on the duration of the policy and the insured's
rate class as follows:
Accumulation Accumulation
Value Value
of $45,000 Greater Than
Policy Year or Less $45,000
Preferred Rate Class:
1-10 0.70 % 0.60 %
11 and higher 0.60 % 0.50 %
Standard Rate Class:
1-10 1.30 % 1.20 %
11 and higher 0.94 % 0.84 %
The cost of insurance for flexible premium variable life policies is based
upon the age, sex, risk and rate class of the insured, the specified amount of
insurance coverage and the length of time the policy has been in force.
TRANSFER CHARGE - United may charge a $10 fee for any transfer in excess of
12 transfers per policy year. This charge is deducted from the amount
transferred.
83
<PAGE>
SURRENDER CHARGE - A surrender charge will be deducted on a full surrender
or a partial withdrawal from the amount requested to be surrendered. The amount
of the charge for single premium variable life policies will depend upon the
period of time since the premium was paid, calculated as follows:
Surrender
Years Since Premium Payment Charge
1 9.50 %
2 9.50 %
3 9.50 %
4 9.00 %
5 7.50 %
6 6.00 %
7 4.50 %
8 3.00 %
9 1.50 %
10 & higher -
The surrender charge for flexible premium variable life policies is
dependent upon the policyholders age, sex, risk and rate class, the length of
time the policy has been in force and the specified amount of coverage. The
highest aggregate surrender charge is $53 for each $1,000 of specified amount of
insurance coverage in the first year declining to $10 per $1,000 in the ninth
year. The length of the surrender charge period varies depending upon the
policyholders issue age and varies between 9 and 12 years.
All account charges are paid through the redemption of shares. Shares
are redeemed based on each policyowners variable portfolio allocation.
84
<PAGE>
5. NET ASSETS
The components of net assets consist of the following cumulative
investment-related accounts at December 31, 1999:
<TABLE>
<CAPTION>
Net Net Changes in
Investment Realized Unrealized
Shares Shares Income Gains Gains Net
Purchased Sold (Expense) (Losses) (Losses) Assets
Alger:
<S> <C> <C> <C> <C> <C> <C>
American Growth $ 838,062 $ (798) $ (24,454) $ 7,298 $ 176,995 $ 997,103
American Small
Capitalization 776,179 (26,125) (19,590) (4,157) 244,207 970,514
Federated:
Prime Money Fund II 11,526,626 (10,543,594) (203,518) - - 779,514
U.S. Government
Securities II 270,705 (6,944) (11,319) (6) (5,375) 247,061
Fidelity:
Asset Manager: Growth 337,468 (7,034) (23,969) 1,997 39,260 347,722
Contrafund 847,498 (61,993) (59,190) 23,837 134,454 884,606
Equity Income 1,334,134 (7,453) (73,186) 5,097 29,521 1,288,113
Index 500 2,614,215 (8,622) (200,572) 26,712 362,115 2,793,848
MFS:
Capital Opportunities 1,049,829 (120,093) (87,023) 30,250 349,657 1,222,620
Emerging Growth 559,903 (20,168) (47,584) 14,911 403,934 910,996
Global Governments 251,585 (4,658) (7,420) 43 (7,005) 232,545
High Income 433,035 (57,989) (2,467) (4,344) 3,280 371,515
Research 440,831 (59,642) (26,720) 10,439 89,324 454,232
Morgan Stanley Dean Witter:
Emerging Markets Equity 19,154 (558) (1,993) 395 8,449 25,447
Fixed Income 112,377 (14,385) 1,930 (379) (4,294) 95,249
Pioneer:
Capital Growth 223,405 (5,264) (15,471) (215) 8,863 211,318
Real Estate Growth 496,911 (36,740) (14,162) (21,894) (25,121) 398,994
Scudder:
Global Discovery 83,880 (486) (5,928) 1,155 51,278 129,899
Growth & Income 357,098 (46,165) 298 (8,819) 1,005 303,417
International 638,032 (42,847) 3,525 3,649 232,095 834,454
T. Rowe Price:
Equity Income 1,044,009 (48,183) (13,825) (963) (26,502) 954,536
International Stock 1,161,771 (9,860) (98,723) 11,708 299,549 1,364,445
Limited-Term Bond 1,356,288 (89,913) (29,015) (2,346) (22,847) 1,212,167
New America Growth 377,002 (9,719) (28,243) 2,857 30,134 372,031
Personal Strategy Balanced 361,270 (14,609) 22,289 753 2,658 372,361
-------- --------- ------- ---- ------ --------
$27,511,267 $(11,243,842)$(966,330) $97,978 $2,375,634 $17,774,707
=========== ============ ======== ====== ========= ==========
</TABLE>
85
<PAGE>
PART II - OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
By a Resolution adopted May 21, 1996, United of Omaha Life Insurance
Company's ("United") Board of Directors provides for indemnification of a
director, officer or employee to the full extent of the law. Generally, the
Nebraska Business Corporation Act permits indemnification against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
if the indemnitee acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interests of the corporation. However, no
indemnification shall be made in any type of action by or in the right of United
if the proposed indemnitee is adjudged to be liable for negligence or misconduct
in the performance of his or her duty to United, unless a court determines
otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of United
pursuant to the foregoing provisions, or otherwise, United has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
may be against public policy as expressed in the Act and may be, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by United of expenses incurred or paid by a
director, officer, or controlling person of United in the successful defense of
any action, suite or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, United
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
REPRESENTATION PURSUANT TO SECTION 26(e)
United represents that the fees and charges under the Policy, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by United.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 86 pages.
The undertaking to file reports.
The Rule 484 Undertaking.
The Section 26(e) Representation.
The signatures.
Written consents of the following persons:
Independent Auditors (included in Exhibit 7)
Thomas J. McCusker, Esquire (included in Exhibit 2)
Robert E. Hupf, F.S.A., M.A.A.A. (included in Exhibit 6)
The following exhibits:
II-1
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
1.A. (1) Resolution of the Board of Directors of United of Omaha Life
Insurance Company establishing the Variable Account. *
(2) None.
(3)(a) Principal Underwriter Agreement by and between United of Omaha
Life Insurance Company, on its own behalf and on behalf of the
Variable Account, and Mutual of Omaha Investor Services, Inc. *
(b) Form of Broker/Dealer Supervision and Sales Agreement by and
between Mutual of Omaha Investor Services, Inc. and the
Broker/Dealer. **
(c) Commission Schedule for Policies. ****
(4) None.
(5)(a) Form of Policy for the ULTRALIFE flexible premium variable
life insurance policy. ****
(b) Forms of Riders to the Policy. ***
(1) Optional Paid-Up Life Insurance Rider. *******
(2) Systematic Transfer Enrollment Program Endorsement to the Policy.
******
(6)(a) Articles of Incorporation of United of Omaha Life Insurance
Company. **
(b) Bylaws of United of Omaha Life Insurance Company. *
(7) None.
(8)(a) Participation Agreement by and between United of Omaha Life
Insurance Company and the Alger American Fund. **
(b) Participation Agreement by and between United of Omaha Life
Insurance Company and the Insurance Management Series. **
(c) Participation Agreement by and between United of Omaha Life
Insurance Company and the Fidelity VIP Fund and Fidelity VIP Fund
II. **
(d) Participation Agreement by and between United of Omaha Life
Insurance Company and MFS Variable Insurance Trust. **
(e) Participation Agreement by and between United of Omaha Life
Insurance Company and Pioneer Variable Contracts Trust. **
(f) Participation Agreement by and between United of Omaha Life
Insurance Company and the Scudder Variable Life Investment Fund.
**
(g) Participation Agreement by and between United of Omaha Life
Insurance Company and T. Rowe Price International Series, T. Rowe
Price Fixed Income Series, and T. Rowe Price Equity Series. **
(h) Participation Agreement by and between United of Omaha Life
Insurance Company and Morgan Stanley Universal Fund , et. al.
*****
(i) Participation Agreement by and between United of Omaha Life
Insurance Company and BT Insurance Funds Trust.*********
II-2
<PAGE>
(9) None.
(10) Form of Application for the United of Omaha Life Insurance
Company ULTRALIFE Flexible Premium Variable Life Insurance
Policy. ****
(11) Issuance, Transfer and Redemption Memorandum ****
2. Opinion and Consent of Counsel.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Opinion and Consent of Actuary.
7. Consent of Independent Auditors.
8. Powers of Attorney.*******
* Incorporated by reference to the Registration Statement for United of Omaha
Separate Account B filed on December 27, 1996 (File No. 333-18881).
** Incorporated by reference to the Registration Statement for United of Omaha
Separate Account C filed on April 24, 1997 (File No. 33-89848).
*** Incorporated by reference to the Registration Statement for United of Omaha
Separate Account B filed on September 15, 1997 (File No. 333-35587).
**** Incorporated by reference to the Registration Statement for United of Omaha
Separate Account B filed on February 5, 1998 (File No. 333-35587).
***** Incorporated by reference to the Registration Statement for United of
Omaha Separate Account C filed on April 16, 1998 (File No. 33-89848).
****** Incorporated by reference to the Registration Statement for United of
Omaha Separate Account B filed on April 16, 1998 (File No. 333-18881).
*******Incorporated by reference to the Registration Statement for United of
Omaha Separate Account B filed on February 12, 1999 (File No. 33-35587).
********Incorporated by reference to the Registration Statement for United of
Omaha Separate Account B filed on April 26, 1999 (File No. 33-35587).
*********Incorporated by reference to the Registration Statement for United of
Omaha Separate Account C filed on April 26, 2000 (File No. 33-89848.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Post-Effective Amendment No. 5 to the Registration Statement of
Form S-6 to be signed on its behalf, in the City of Omaha and State of Nebraska,
on April 26, 2000.
UNITED OF OMAHA SEPARATE ACCOUNT B
(Registrant)
UNITED OF OMAHA LIFE INSURANCE COMPANY
(Depositor)
/s/Thomas J. McCusker
-----------------------
By: Thomas J. McCusker
As required by the Securities Act of 1933, this Post-Effective Amendment No. 5
to the Registration Statement has been signed by the following persons in the
capacities and on the duties indicated:
Signatures Title Date
_____*____________________ Chairman of the Board, 4/26/00
John W. Weekly Chief Executive Officer
_____*____________________ Director, President, 4/26/00
John A. Sturgeon Chief Operating Officer
_____*____________________ Treasurer and Comptroller 4/26/00
Tommie Thompson (Principal Financial Officer, and
Principal Accounting Officer)
_____*____________________ Director 4/26/00
Samuel L. Foggie, Sr.
_____*___________________ Director 4/26/00
Carol B. Hallett
_____*___________________ Director 4/26/00
Jeffrey M. Heller
_____*__________________ Director 4/26/00
Thomas W. Osborn
_____*___________________ Director 4/26/00
Richard J. Sampson
_____*___________________ Director 4/26/00
Oscar S. Straus II
_____*__________________ Director 4/26/00
Michael A. Wayne
By: /s/ Thomas J. McCusker Date: April 26, 2000
----------------------------
Thomas J. McCusker
* Signed by Thomas J. McCusker under Powers of Attorney effective indefinitely
as of January 1, 1999, filed as exhibits incorporated by reference in this
Post-Effective Amendment No. 5 to the Registration Statement.
II-4
<PAGE>
Registration No. 333 -35587
811-08336
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
UNITED OF OMAHA SEPARATE ACCOUNT B
OF
UNITED OF OMAHA LIFE INSURANCE COMPANY
EXHIBITS
TO
THE POST-EFFECTIVE AMENDMENT NO. 5 TO THE
REGISTRATION STATEMENT ON FORM S-6
UNDER
THE SECURITIES ACT OF 1933
April 26, 2000
<PAGE>
EXHIBIT INDEX
2. Opinion and Consent of Counsel
6. Opinion and Consent of Actuary
7. Opinion and Consent of Auditor
Exhibit (2): Opinion and Consent of Counsel
UNITED OF OMAHA LIFE INSURANCE COMPANY
Mutual of Omaha Plaza. 3-Law
Omaha, Nebraska 68175-1008
April 21, 2000
United of Omaha Life Insurance Company
Mutual of Omaha Plaza
Omaha, NE 68175-1008
To Whom It May Concern:
With reference to the Post-Effective Amendment for Registration Number 333-35587
on Form S-6 filed by United of Omaha Life Insurance Company and United of Omaha
Separate Account B with the Securities and Exchange Commission covering flexible
premium variable life insurance policies, I have examined such documents and
such laws as I considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:
1. United of Omaha Life Insurance Company is duly organized and validly
existing under the laws of the State of Nebraska and has been duly
authorized to issue variable life insurance policies by the Insurance
Department of the State of Nebraska.
2. United of Omaha Separate Account B is a duly authorized and existing
separate account established pursuant to the provisions of Section
44-402.01 of the Statutes of the State of Nebraska.
3. The flexible premium variable life insurance policies, when issued as
contemplated by the Form S-6 Registration Statement, will constitute
legal, validly issued and binding obligations of United of Omaha Life
Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment to the Form S-6 Registration Statement and to the use
of my name under the caption "Legal Proceedings" in the Prospectus contained in
the Registration Statement.
Sincerely,
/s/ Thomas J. McCusker
General Counsel
United of Omaha Life Insurance Company
Exhibit (6): Opinion and Consent of Actuary.
DATE: March 1, 2000
TO: UNITED OF OMAHA LIFE INSURANCE COMPANY
FROM: Robert E. Hupf, FSA, MAAA
Vice President and Actuary
RE: ACTUARIAL OPINION
This opinion is furnished in connection with the 2000 annual update registration
by United of Omaha Life Insurance Company of a Flexible Premium Variable
Universal Life Insurance policy 6387L-1197 under the Securities Act of 1933. The
prospectus included in the Pre-Effective Amendment No. 1 to Registration State
No. 333-35587 on Form S-6 describes the Policy. I have reviewed the Policy form
and I have participated in the preparation and review of the Registration
Statement Exhibits thereto.
In my opinion, the illustration of death benefit, surrender value, and premium
shown in the Illustration section of the Policy prospectus included in the
amended Registration Statement, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. Such
assumptions, including the current cost of insurance rates and other charges,
are reasonable. The ages selected in the illustrations are representative of the
manner in which the Policy operates. The Policy has not been designed so as to
make the relationship between premiums and benefits, as shown in the
illustrations, appear to be more favorable to prospective purchasers of Policies
at the ages and in the rate classes illustrated than to prospective purchasers
of Policies, for males or females, at other ages.
I hereby consent to the filing of this opinion as an exhibit to the Annual
Update Registration Statement and to the use of my name under the heading
Experts in the prospectus as to actuarial matters.
/s/ Robert E. Hupf, FSA, MAAA
Vice President and Actuary
Exhibit (7): Consents of Independent Auditors
INDEPENDENT AUDITORS CONSENT
We consent to the use in this Post-Effective Amendment No 5 to Registration
Statement No. 333-35587 of United of Omaha Separate Account B of our report
dated March 31, 2000, on the financial statements of United of Omaha Separate
Account B and our report dated February 11, 2000, on the financial statements of
United of Omaha Life Insurance Company appearing in the Prospectus, which is a
part of such Registration Statement, and to the related reference to us under
the heading "Independent Auditors" in such Prospectus
/s/ DELOITTE & TOUCHE LLP
Omaha, Nebraska
April 26,2000
